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Table 2 Distinguishing feature of the WITCH model

From: A Good Opening: The Key to Make the Most of Unilateral Climate Action

Key distinguishing feature WITCH model
Solution concept Intertemporal optimisation (Ramsey-type growth model)
Expectations/foresight Default: perfect foresight
Substitution possibilities within the macro-economy / sectoral coverage CES production function of generic final good from primary inputs capital and labor and intermediate inputs energy
Link between energy system and macro-economy Economic activity determines demand; energy system costs (investments, fuel costs, operation and maintenance) are included in macro-economic budget constraint. Hard link, i.e. energy system and macro-economy are optimised jointly
Production function in the energy system / substitution possibilities Non-linear substitution between competing technologies for electricity generation modelled with CES production functions. Supply curves for exhaustible resources
Land use MAC curves for deforestation
International macro-economic linkages / Trade Single market for some commodities (permits) International spillovers of knowledge (energy R&D) and of experience (Learning-By-Doing for wind and solar) International energy markets
Technological change / learning Global learning-by-doing for wind and breakthrough technologies in the power and final sector; Learning-By-Researching for breakthrough technologies with international spillovers of knowledge; energy efficiency R&D investments with spillovers
Representation of end-use sectors Electric (power generation from gas, coal, and oil; coal IGCC on combination with CCS, nuclear, hydro, wind, solar), non-electric (final use of coal, oil, gas, biomass, first and second generation biofuels), final good sector
Cooperation versus non-cooperation Nash equilibrium (non-cooperative) or Pareto equilibrium (cooperative)
Externalities Environmental and technology externalities. Externalities are not internalised in the Nash equilibrium while cooperation can address both externality jointly or separately.
Utility Log utility. Risk aversion coefficient equal to 1
Investment dynamics Capital motion equations, no vintage