Applied General Equilibrium Modeling for Environmental Policy Analysis

  • Klaus Conrad
Conference paper


Given the challenge to more restrictive environmental regulation by groups in society, it is becoming more and more important to quantify the costs of such a policy. Applied general equilibrium (AGE) modeling is becoming a widely used tool for this purpose. The objective of this paper is to present the conceptual framework for modeling the effects of unilateral environmental control policies on a country’s economy. Especially unilateral actions, e.g. a CO2 control by a small country, will cause a loss of international sector competitiveness in energy intensive industries. AGE models for assessing these effects become more and more sophisticated. From a scientific point of view, research to attenuate some of its unrealistic assumptions is desirable. From a pragmatic point of view, the variety of conceptual approaches makes it more and more difficult to understand, why a certain target for CO2 emissions, e.g., calls for a tax rate of $20 by one model builder and $300 by another one. In this paper we will survey some technical details in setting up AGE models. We will also present some results from introducing a cost-effective environmental policy in air pollution or from introducing a CO2 tax. We will not, however, present a complete survey of the state of art in AGE modeling for environmental policy analysis.


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Copyright information

© Springer-Verlag Berlin Heidelberg 1993

Authors and Affiliations

  • Klaus Conrad
    • 1
  1. 1.Lehrstuhl für VolkswirtschaftslehreUniversität MannheimSchloßGermany

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