CGE Models: Linking natural resources to the CGE framework

The incorporation of natural resources has been a growing area of focus in the evolution of computable general equilibrium (CGE) models, which use actual data to estimate the economic impacts of changes in technology, consumption patterns and other factors. A case in point is the explicit representation of land use and land use conversion in global CGE models in order to project land use impacts on food prices, international trade, climate change mitigation strategies and other critical global and regional concerns. In the third chapter of the forthcoming book Global Economic and Computable General Equilibrium Models of Society, Environment and Resources, DOE-funded researchers at the MIT Joint Program on the Science and Policy of Global Change describe one approach to including land use in a global CGE model—the MIT Emissions Prediction and Policy Analysis (EPPA) model—and representing its connection to the broader economy through agriculture and forestry production. In simulations produced by the EPPA model, they find important linkages between environmental services and economic development as well as differences in land use trajectories among developed and developing countries. The researchers show that parameters defining agricultural yields and population growth, far more than GDP growth rates, are particularly important in projecting future services from land use.

The chapter, “CGE models: Linking natural resources to the CGE framework,” has been published in Global Economic and Computable General Equilibrium Models of Society, Environment and Resources, Volume 3 in The WSPC Set on Globalization, Society and Environment.