Computable General Equilibrium Modeling for Climate Policy Analysis
Summary
Computable general equilibrium (CGE) models provide a coherent framework for assessing economy-wide effects of climate policies by capturing interactions across production sectors, households and international trade. These models translate policy instruments such as carbon pricing, emissions trading and subsidy reforms into changes in prices, quantities and welfare under the assumption of market clearing and resource constraints. Recent efforts have enriched CGE frameworks with dynamic structures that account for investment, technological change and labour adjustments over time. Hybrid approaches now link CGE models to detailed energy system representations, ensuring that macroeconomic consistency is maintained alongside a granular portrayal of energy technologies and emission flows. Such integrated analyses inform the design of efficient, equitable and feasible mitigation strategies at national and global scales, offering policy-makers robust projections of sectoral impacts, abatement costs and distributional outcomes.
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Computable General Equilibrium Modeling for Climate Policy Analysis publication trend
The graph below shows the total number of articles in computable general equilibrium modeling for climate policy analysis across all publications each year (not limited to Nature Index journals).
Technical terms
Computable General Equilibrium (CGE) model: A multi-sectoral economic model that solves for market‐clearing prices and quantities under specified policy or shock scenarios.
Bottom-up energy system model: A technology-rich simulation of energy supply, conversion and end-use that emphasises engineering detail and cost estimates.
Soft-linking: An approach that exchanges results iteratively between different models without merging their underlying equations into a single framework.
Carbon pricing: A policy instrument that assigns a cost to greenhouse gas emissions, typically through taxes or cap-and-trade schemes.
Abatement cost: The incremental economic cost incurred to reduce an additional unit of greenhouse gas emissions.
References
- Soft-linking a national computable general equilibrium model (ThreeME) with a detailed energy system model (IESA-Opt). Energy Economics (2023).
- Integration of energy system and computable general equilibrium models: An approach complementing energy and economic representations for mitigation analysis. Energy (2024).
- How can computable general equilibrium models serve low-carbon policy? A systematic review. Environmental Research Letters (2023).
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