E3MG

The Energy-Environment-Economy Model at the Global level (E3MG) is a large-scale macroeconomic simulation model of the global economy with detailed, integrated treatments of energy demand and the consequent atmospheric emissions.
 
Work
The model has been applied in studies on macroeconomic effects of climate change policies and other economic and environmental policies, such as the Tyndall-led ADAM project as well as in various policy assessments for national governments, the European Commission and the UN.
 
History
The first version of E3MG was presented in 1998. In 1999 the model was developed further to incorporate China-Japan interlinkages (air pollution) funded by the Export-Import Bank of Japan. The second version of E3MG was developed with the support by the Tyndall Centre from 2001 to 2004 as a pilot demonstration global model with four economic regions. This was followed by further developments and an expansion of the model to 20 world regions including all leading CO2 emitting countries (Tyndall funded 2006-2009, 2008-2011).
 
Description
E3MG covers 20 world regions that include all major developing (e.g. Brazil, Mexico, India and China) and developed (e.g. USA, UK, Germany) economies. E3MG provides projections forward annually to 2050 then every 10 years to 2100.
 
The model has a theoretical framework characterised by:

  • A simulation approach to understanding economic behaviour, based on demand for goods and services constrained by available supplies of resources, including labour.
  • A high level of disaggregation in terms of the institutional sectors of the economy and the categories of final household expenditure identified.
  • An input-output framework that identifies explicitly the interdependencies between sectors.
  • Trade matrixes that identify interdependencies between regions.
  • Two-way linkages between the economy and the energy system such that changes in one (e.g. from policies) impact on, and are reflected consistently in the other.
  • In principle coverage of 14 atmospheric pollutants (GHGs and non-GHGs) from 50 emission sources.
  • Dynamic econometrically-estimated equations, capturing short-term impacts followed by medium-term adjustment to a long-run steady state.

E3MG is based on annual time-series data with a detailed sectoral disaggregation. The main data sources are:

  • OECD Structural Analysis database
  • International Energy Agency
  • EDGAR emissions database
  • Eurostat
  • World Bank
  • United Nations

The high level of sector disaggregation in the model and its interconnectedness through the input-output framework makes it capable of examining the potentially differing policy impacts on each sector both directly and indirectly (through changes in demand from other sectors).
This economy-wide, as opposed to partial, approach recognises that there may be implications for sectors that are not specifically targeted by a particular policy package and is an important consideration in an Impact Assessment. The integrated treatment of the energy system allows for the analysis of policies that address, for example, fuels or carbon emissions.
 
The last of the characteristics listed, empirically-validated dynamics (the time path of an
economy), is a key feature of E3MG that sets the model apart from the Computable General
Equilibrium (CGE) approach. CGE models are ‘static’ in that they compare depictions of the economy that are in equilibrium before and after a policy intervention; the transition between the two states is not captured in the models. In contrast E3MG does capture such transition (non-equilibrium) states.
 
Another area in which E3MG differs from many other models is that it does not assume perfectly-competitive markets in which long-run excess profit is impossible. Instead, products may be differentiated and/or firms may be large relative to the size of the market, allowing for price-setting behaviour. This is important when considering impacts on sectoral and regional competitiveness, for example, due to changes in consumption-based climate change mitigation policies.
 
Papers

  • Barker, Terry, Annela Anger, Unnada Chewpreecha, and Hector Pollitt (2012), ‘http://tyndall.ac.uk/publications/journal-article/2012/new-economics-approach-modelling-policies-achieve-global-2020-targA new economics approach to modelling policies to achieve global 2020 targets for climate stabilisation’,  Special Issue on ‘Economic Policies of the New Thinking in Economics’, International Review of Applied Economics, Vol. 26, No. 2, pp. 205-211.
  • Barker, Terry, Annela Anger, Olivier Dessens, Hector Pollitt, Helen Rogers, Serban Scrieciu,  Rod Jones and John Pyle, ‘Integrated modelling of climate control and air pollution: methodology and results from one-way coupling of an energy-environment-economy (E3MG) and atmospheric chemistry model (p-TOMCAT) in decarbonising scenarios for Mexico to 2050’ Environmental Science and Policy, 2010, 13: 661-670 doi:10.1016/j.envsci.2010.09.008
  • Dagoumas, Athanasios and Terry Barker (2010) ‘Pathways to a low-carbon economy for the UK with the macro-econometric E3MG model’, Energy Policy 38:6, pp. 3067-3077.
  • Hector Pollitt and Terry Barker, (2009), ‘Modelling the financial crisis with the global E3MG model’, ICFAI Journal of Applied Economics, Volume-VIII, Issue Nos 5 & 6, Sep-Nov 2009.
  • Barker, Terry and Serban Scrieciu, (2010), ‘Modeling low stabilization with E3MG: towards a “New Economics” approach to simulating Energy-Environment-Economy system dynamics’, Energy Journal Special Issue on “The Economics of Low Stabilisation”, January 2010, pp.137-164.
  • Barker, T. and Scrieciu, S.Ş. (2009) ‘Unilateral climate change mitigation, carbon leakage and competitiveness: an application to the European Union’, Int. J. Global Warming, Vol. 1, No. 4, pp.405–417.
  • Barker, Terry, Athanasios Dagoumas and Jonathan Rubin  (2009) ‘The macroeconomic rebound effect and the world economy’. Energy Efficiency 2(4) pp 411-427. doi: 10.1007/s12053-009-9053-y
  • Barker, T., Foxon, T. and Scrieciu, Ş. S. (2008), ‘Achieving the G8 50% target: modelling induced and accelerated technological change using the macro-econometric model E3MG’, Climate Policy Special Issue on ‘Modelling long-term scenarios for low-carbon societies’, 8: S30-S45.
  • Barker, T., Pan, H., Köhler, J., Warren, R., Winne, S. (2006) ‘Decarbonizing the Global Economy with Induced Technological Change: Scenarios to 2100 using E3MG’, The  Energy Journal 27: 241-258.
  • Köhler, J., Barker, T.,  Anderson, D. and Pan, H (2006) ‘Combining energy technology dynamics and macroeconometrics: the E3MG model for climate stabilization scenarios’ for The Energy Journal Special Issue on bottom-up and top-down modeling, 113-133.
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