GREEN-WIN Macroeconomic Scenarios Simulated with the GEM-E3-WIN Model
Within Work Package 3 of the GREEN-WIN project, E3-Modelling will simulate a set of alternative macroeconomic scenarios with the GEM-E3-WIN model. The aim of these simulations is to address questions regarding market imperfections that prevent the full realisation of economic opportunities from climate change policies and the economic effects from removing them and implementing mitigation policies.
The qualitative context of the scenarios was finalized following discussions during the GREEN-WIN kick off-meeting in October 2015 and a dedicated modelling meeting that took place in early February 2016. Project partners have agreed to build the scenarios along three dimensions, namely the extent of collective action, the type of actors leading green growth policies and financing and the ambition embedded in climate change mitigation policies. The main assumptions of the scenarios are summarized below. The development of the scenarios is ongoing, thus the modelling team welcomes comments and suggestions.
Basic scenario groups, including the reference scenario, will be simulated up to 2050. In the scenario groups ambition to pursuing climate change policies ranges from low, i.e. policies fall short of the 1.5°C target, to high. The reference scenario describes a state of affairs and future perspectives where current trends and policies continue up to the end of the simulation period. Countries implement the already agreed climate change mitigation commitments. Market imperfections persist and markets and governments fail to overcome these and generate the necessary conditions to trigger new green growth financing alternatives. The reference scenario is modelled as a low-ambition scenario.
In the first scenario group the world remains fragmented in climate change mitigation action. Financing of green investments is constrained at country and regional borders. Overall the emphasis is on local solutions to economic, social and environmental sustainability where local markets succeed to identify opportunities and develop green financing alternatives, although not being able to reap scale benefits.
In the second scenario group a future state of rapid convergence among regions and capacity building with a substantial reduction in regional fragmentation and action is assumed. Economic developments are affected by deep market integration, rapid introduction of new and more efficient financing schemes and technologies. Financial and technological emphasis is put on traditional and non-traditional energy sources driven by rate of returns and perfect information available.
In the third scenario group future global solutions to climate change and environmental sustainability originate from government led green-growth initiatives. Scenario dynamics are associated with government triggered actions. Regulations, improved financing conditions and market signaling are shaped from government policy actions that coordinate at the global level.
The scenario simulation undertaken by E3-Modelling will add to the GREEN-WIN project goals by assessing plausible, comprehensive, integrated and consistent descriptions of future developments. This will allow for the assessment of the importance of GHG mitigation ambition on driving technical progress, correcting market failures and managing expectations and for the quantification of economic effects of alternative choices and policies implemented.