with Christoph Böhringer and Volker Clausen
15th Ruhr Graduate Summer School: Economic Impact Assessment of Energy and Climate Policies using GAMS and MPSGE
University of Duisburg-Essen, Germany
Computer-based simulations to quantify the economic impacts of policy reforms play a key role in applied economic research. Among numerical methods, computable partial equilibrium (CPE) and computable general equilibrium (CGE) models are widely employed for sector-specific and economy-wide impact assessment. CPE and CGE models build upon equilibrium theory that combines assumptions regarding the optimizing behavior of economic agents with the analysis of equilibrium conditions. Quantitative equilibrium analysis provides counterfactual ex-ante comparisons, assessing the outcomes with a new policy reform in place against the business-as-usual situation.
The workshop develops step by step quantitative models that are used for the economic assessment of energy and climate policy initiatives. The course will follow model-based peer-reviewed publications in reputed international journals such as The Energy Journal, Energy Economics, Journal of Regulatory Economics, Computational Economics, or Journal of Economic Dynamics and Control to cover contemporary policy issues including
- support mechanisms (feed-in tariffs/premia, renewable portfolio standards) to electricity from renewable energy sources (RES-E),
- greenhouse gas emission regulation policies (emissions pricing and trading (EU ETS), emission floor price options, emission standards),
- environmental (green) tax reforms.
The primary focus of the workshop will be on the detailed presentation and discussion of numerical simulation models that are underlying the quantitative policy analysis in these publications. Participants will thereby get familiar with state-of-the-art modeling approaches ranging from energy system models to integrated bottom-up/top-down models of the economy.
Mathematically the CPE and CGE models are formulated and implemented as “mixed complementarity problems” (MCP). The MCP formulation explicitly incorporates the feature of complementary slackness – i.e., complementarity between economic decision variables and associated economic equilibrium conditions – accommodating the comprehensive analysis of real world economic issues.
For the computer implementation of economic equilibrium models the course builds on the high-level programming language GAMS (Generalized Algebraic Modeling System) whose notation closely follows standard matrix algebra. The fundamental strength of GAMS lies in the ease with which mathematically-defined models can be formulated and solved. To facilitate the formulation of large-scale CGE models, we will use the Mathematical Programming System for General Equilibrium analysis (MPSGE) – a wide-spread meta-language for CGE modeling operational under GAMS.
Material and teaching is in English. Registered participants will receive the teaching material prior to the start of the workshop such that they can prepare in advance. Teaching will combine lectures on theoretical underpinnings of policy assessment with numerical model applications based on peer-reviewed publications.