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

Abstract

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.