ECONOMIC MODELING 1. What are the main types of economic modeling used for climate change policies?
• Top down or CGE (computational general equilibrium) models solve iteratively for policy induced changes in all sectors of the economy. • A bottom up or technology rich model starts with detailed representation of changes in the energy sector and then calculates broader effects on the economy. Top 2. What type of modeling does the Pew Center undertake? The Pew Center has a multi-year modeling effort with a premier CGE model called IGEM, to improves the state-of-the-art economic modeling of climate policies, and generate robust and insightful analyses of various proposals as they are debated. Top 3. What are the strengths and weakness of top-down (CGE) models? A top-down computational general equilibrium (CGE) model is able to estimate the macro-economic impacts of higher fossil fuel prices, higher raw material costs, altered productivity, changing competitive advantages and methods of recycling of emission credit revenue throughout the entire economy. • These models generally produce
