Title: Promoting Renewable Energy in Europe: A Hybrid CGE Approach
Authors: LOESCHEL AndreasBOEHRINGER Christoph
Citation: ENERGY JOURNAL vol. Special issue: Hybrid Modelling: New Answers to Old Challenges p. 135-150
Publication Year: 2006
JRC N°: JRC34350
URI: http://publications.jrc.ec.europa.eu/repository/handle/JRC34350
Type: Articles in periodicals and books
Abstract: In this paper, we illustrate the use of a hybrid large-scale computable general equilibrium (CGE) model to investigate the economic and environmental effects of renewable energy promotion within the European Union. Our hybrid CGE model incorporates technological explicitness of bottom-up (engineering) energy system models for the electricity sector while representing aggregate technological options in other sectors in the conventional CGE approach by means of constant elasticities of substitution (transformation). The bottom-up technology foundation of top-down CGE models is possible when adopting the so-called mixed complementarity problem (MCP) approach – a flexible mathematical representation of market equilibrium conditions (Rutherford 1995). In the following section, we provide a non-mathematical characterization of the MCP approach. We then demonstrate along a stylized example how the MCP framework can be exploited to combine a simplistic macroeconomic general equilibrium model with a bottom-up technology-based model of energy supply. A large-scale implementation of a hybrid CGE model for the EU-15 is subsequently used to investigate the impacts of renewable energy promotion.
JRC Directorate:Growth and Innovation

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