Annex 4 analytical methods

model description

general description

acronym: GEM-E3

name: General Equilibrium Model - Economy, Energy, Environment

main purpose: A macro-economic model used to assess energy, climate and air quality policies.

homepage: https://joint-research-centre.ec.europa.eu/gem-e3_en

Developer and its nature

ownership: Co-ownership (EU & third parties)

ownership additional info: The ownership is shared with the institutions that developed the model and the JRC, European Commission: a) Institute of Communication and Computer Systems - National Technical University of Athens (ICCS/NTUA); b) CES, Centre for Economic Studies, Katholieke Universiteit Leuven c) DG JRC, European Commission (C6) which has developed various modules for GEM-E3, as well as extended and updated the supporting databases (incl. GTAP).

is the model code open-source?: NO

Model structure and approach with any key assumptions, limitations and simplifications

details on model structure and approach

GEM-E3 can be used for policy anticipation, formulation and implementation.

In terms of anticipation and formulation, as applied general equilibrium model covering the interactions between the Economy, the Energy system and the Environment with high level of details, the GEM-E3 Model is well suited to assess the impact of climate, energy, and transport regulations, as well as fiscal, air quality, and labour market policies. It can simulate the welfare effects of alternative regulation regimes as well as the consequences of emission targets.

The Clean Air Programme for Europe envisages a regular update of the impact assessment analysis, to track progress towards the objectives of the Directive and to serve as input into the regular Clean Air Forum. In 2018 GEM-E3 was used to update the Impact Assessment during the implementation phase. For more information see http://ec.europa.eu/environment/air/clean_air/outlook.htm. Results featured in the First Clean Air Outlook.

One of the applications of the model includes an economic and employment impact assessment of different EU decarbonisation scenarios for 2050. This is included in the in-depth analysis accompanying the European Commission's Clean Planet for All communication of 2018. See https://ec.europa.eu/clima/policies/strategies/2050_en#tab-0-1

See https://ec.europa.eu/jrc/en/gem-e3 for latest updates.

model inputs

Input/Output tables and SAM (GTAP, Eurostat)
Energy balances (International Energy Agency, IEA)
Elasticity of Substitution and Armington elasticity (economic literature)
Costs of Abatement Technology (Research Projects)
Emission coefficients (Research Projects)
Techno-economic inputs from sectoral models such as POTEnCIA, PRIMES, POLES, GAINS, and GLOBIOM

model outputs

GEM-E3 analyzes the economic and distributional effects of environmental and economic policies for sectors, agents and regions. The output of GEM-E3 includes projections of

input-output tables
employment
trade
capital flows
government revenues
household consumption
energy use
atmospheric emissions.

The model allows the evaluation of the welfare and distributional effects of various environmental policy scenarios, including different burden sharing scenarios, environmental instruments (i.e. taxes, pollution permits or command-and-control policy) and revenue recycling scenarios.

Intended field of application

policy role

GEM-E3 can be used for policy anticipation, formulation and implementation.

The Clean Air Programme for Europe envisages a regular update of the impact assessment analysis, to track progress towards the objectives of the Directive and to serve as input into the regular Clean Air Forum. In 2018 GEM-E3 is used to update the Impact Assessment during the implementation phase. For more information see http://ec.europa.eu/environment/air/clean_air/outlook.htm. Results featured in the First Clean Air Outlook.

One of the applications of the model includes an economic and employment impact assessment of the European Commission's strategic long-term vision for greenhouse gas reductions, a document that sets the stage for the debate on the long-term climate policy in the EU.

Concerning contributions to Impact Assessments see www.gem-e3.net for latest updates.

policy areas

Climate action
Taxation
Employment and social affairs
Energy
Environment
Transport

Model transparency and quality assurance

Are uncertainties accounted for in your simulations?: YES - Policy uncertainty is covered by running several scenarios in a what-if fashion

Has the model undergone sensitivity analysis?: YES - Sensitivity of output results is done on ad-hoc basis

Has the model been published in peer review articles?: YES - The output published in academic papers and presented on academic conferences have been reviewed by peers. In addition, separate versions of the model are run independently by JRC and NTUA / E3M-Lab in Athens, enabling comparison of findings and investigation of differences.

Has the model formally undergone scientific review by a panel of international experts?: NO

Has model validation been done? Have model predictions been confronted with observed data (ex-post)?: YES - As the model does not aim to predict the future, we mainly validate the model through results with our peer group. In addition, elasticity parameters are based on historical data to validate partial model responses, such as reactions to changes in energy prices

To what extent do input data come from publicly available sources?: Entirely based on publicly available sources

Is the full model database as such available to external users?: YES - The core data, GTAP, are publicly available (if purchased) Other major inputs like IEA energy balances etc. are as well. The input-output tables for future years are published and freely available for the GECO report (from 2018 onwards).

Have model results been presented in publicly available reports?: YES

Have output datasets been made publicly available?: NO - Output usually is published in Report and academic papers. More detailed output can be published upon request

Is there any user friendly interface presenting model results that is accessible to the public?: NO

Has the model been documented in a publicly available dedicated report or a manual?: YES

Intellectual property rights

Licence type: Non-Free Software licence

application to the impact assessment

Please note that in the annex 4 of the impact assessment report, the general description of the model (available in MIDAS) has to be complemented with the specific information on how the model has been applied in the impact assessment.

See Better Regulation Toolbox, tool #11 Format of the impact assessment report).