What are the effects of climate change mitigation measures? Energy-economic models and analyses
Quantitative, model-based analyses are necessary to assess and further develop climate protection measures and to compare different scenarios. Policy measures or climate protection targets are incorporated in different scenarios and the economic and ecological impacts are analysed in comparison to a reference development. These analyses enable quantitative observations to be made on emission, economic (output, structure, prices, employment, trade, distribution) and technological developments and can lay the foundation for decisions on climate policy. Depending on the question at hand, different model types are applied.
Macro-economic models: Macro-economic models such as computable general equilibrium models (CGE models) or input-output models (IO models) cover the overall economy and are used to analyse economic and environmental effects. These models include all sectors of national economies and show the effects on all markets including their interactions with one another. Interaction with the energy markets is thus a key focus of such models.
Engineering models: Engineering models – so-called “bottom-up models” – are used to analyse different economic sectors that are particularly relevant to energy and climate policy (e.g. the electricity sector). These models calculate the optimal, lowest cost technology mix, on the basis of which climate policy targets can be realised.
Micro-economic models: Based on data on households, companies or individual markets, the decision-making processes of different economic actors and the pricing on different markets are shown. Special attention is given to the distributional effects of energy and climate policy measures on the household level and their effects on the electricity and carbon markets.
Energy economic models in action
Oeko-Institut uses energy-economic models to answer diverse questions. The models used were developed and are continuously expanded and updated by researchers at the institute.
PowerFlex is an electricity market model which is used to calculate the optimum operation of power plants, storage and flexibility options in the fulfilment of the electricity and district heating demand and in making available the balancing capacity. What is special about this model is that it incorporates different flexibility options on the side of both electricity demand and supply. From the calculated dispatch profiles for power plants, storage and flexible electricity demand (e.g. cold storage facilities and electric vehicles), additional key results are modelled such as CO2 emissions, storage losses and the resulting electricity prices. The PowerFlex model is used in varied research projects of the institute and can be linked with the ELIAS investment model.
PowerFlex-Grid models the German transmission grid with approx. 500 nodes. Neighbouring European countries are also incorporated in simplified form as network nodes to enable modelling of electricity imports and exports between these countries.
ELIAS: The Electricity Investment Analysis Model is a capital cost model for the German electricity sector. It determines what power plant investments represent the lowest cost options under given economic framework conditions. In the Policy Scenarios (Politikszenarien) project, the impacts of different climate protection measures on the future power plant fleet and the corresponding CO2 emissions are analysed. ELIAS is also applied to examine the impacts of renewable energies and electric mobility on the power plant fleet.
FARM-EU is a multi-regional, multi-sectoral, dynamic computable general equilibrium model (CGE model) with a focus on assessing the environmental, economic and international trade effects of energy and climate policies in a scenario based approach. FARM-EU covers 38 production sectors (with a focus on energy industries) in 20 regions (with focus on EU countries) and expands up to the year 2050. FARM-EU reveals insights on effects of policies and measures on prices (international, regional, national input and output prices), GDP, sectoral value added, structural effects, changes in consumer and producer rents, on trade flows and patterns as well as energy demand and CO2 emissions, including leakage effects.
Distributional Analysis of Energy Efficiency Measures (EnEffDist): Every energy and climate policy measure brings about distributional effects among the population. On the basis of detailed household data, the distributional effects of energy saving and efficiency measures or policies (e.g. the EEG, the EU ETS) can be determined. The effect on different household types of an induced price change of consumer goods or changes in the quantities demanded on different types of household is also modelled. The individual dimensions of distribution that are considered include disposable income, composition and social position (e.g. employee, pensioner, student) of different households.
Econometrics and Statistics (OekoStat): With the help of econometric analyses of times series and household or company data, historical connections between different factors are determined, from which conclusions on their further development are drawn. These analyses are above all incorporated in order to model the influence of energy and climate policy measures on prices and the behaviour of households and companies. The issues examined include, for example, pricing on the carbon market and the calculation of the merit order effect of renewable energies in the context of the German Renewable Energy Sources Act (EEG).
EmIO is an input-output model which models the interconnections of the sectors of the national economy and has an explicit module for impacts on jobs. It is available in two forms – EmIO-D (Germany) and EmIO-EU – and is based on the input-output tables of the German Federal Statistical Office and Eurostat respectively, which are published each year within the scope of national economic accounting. EmIO can be used to calculate the employment effects of investments, cost savings or additional costs, which come about in the different sectors as a result of energy and climate policy measures, while taking into account the interconnections of the national economy and inputs from other sectors.
Modelling for policy consultancy and research
Well-founded, transparent and robust quantitative model analyses are an important tool in consultancy and research on energy and climate policy. They generate figures and methods for the evaluation of climate protection measures, which serve as a basis for important decisions and negotiations. Models make quantitative statements on the costs and benefits of energy and climate policy measures, show the effects on the overall economy and individual economic segments, and calculate social and economic ramifications such as structural changes or impacts on jobs and distributional effects. They are based on aspects which affect our daily activities – e.g. power consumption when cooking, cooling and heating, on the way to work, in schools, and hospitals – and put their environmental compatibility to the test.
The modelling activities carried out at Oeko-Institut contribute to policy and society being able to make well-founded decisions.
- help to answer current questions in energy and climate policy;
- apply methodically sound approaches and develop them further;
- use high-quality datasets and indicators;
- conduct sensitivity calculations which support the robustness of results;
- present the results of our analyses in a comprehensible way to the interested public; and lead an open discussion of the approaches and results.