The Economic Projection and Policy Analysis Model for Taiwan: A Global Computable General Equilibrium Analysis

We present and evaluate a new global computable general equilibrium (CGE) model to focus on analyzing climate policy implications for Taiwan’s economy and its relationship to important trading partners. The main focus of the paper is a critical evaluation of data and model structure. Specifically, we evaluate the following questions: How do the different reference year data sets affect results of policy simulations? How important are structural and parameter assumptions? Are explicit treatment of trade and international policy important? We find: (1) Higher mitigation costs across regions using data for the year of 2011, as opposed to cases using the 2007 and 2004 data, due to increasing energy cost shares over time. (2) Lower GDP losses across regions under a broad carbon policy using a more complex model structure designed to identify the role of energy and GHG emissions in the economy, because the formulation allows more substitution possibilities than a more simplified production structure. (3) Lower negative impacts on GDP in Taiwan when it carries out its national determined contribution (NDC) as part of a global policy compared with unilateral implementation because, under a global policy, producer prices for fossil fuels are suppressed, benefiting Taiwan’s economy.We are thankful for the financial support provided by National Energy Program-Phase II and Atomic Energy Council, Executive Yuan, Taiwan, and the valuable comments from participants of the MIT EPPA meeting, the 2016 Taiwan Association of Environmental and resource Economics, and the 20th Annual Conference on Global Economic Analysis held in Purdue University. We are also grateful to Jamie Bartholomay for their excellent edits in improving the paper. All remaining errors are our own