Dynamic CGE Model Analysis of the Transition to a Low-Carbon Economy

Abstract

This paper presents a dynamic Computable General Equilibrium (CGE) model analysis to assess the implications of transitioning to a low-carbon economy. As concerns over climate change and environmental sustainability continue to grow, policymakers and stakeholders are increasingly focused on reducing greenhouse gas emissions and promoting renewable energy and energy-efficient technologies. Using a dynamic CGE modeling approach, this study evaluates the economic, social, and environmental impacts of various policy interventions aimed at mitigating carbon emissions and promoting the transition to a low-carbon economy. The model accounts for the interactions between different economic sectors, households, and government policies over time, capturing the complex dynamics of structural transformation, technological change, and investment behavior in response to climate policies. Through scenario analysis and sensitivity testing, the research assesses the effectiveness of alternative policy measures, such as carbon pricing, renewable energy subsidies, and energy efficiency standards, in achieving emission reduction targets while minimizing adverse economic consequences. Furthermore, the study examines distributional effects and equity considerations associated with the transition to a low-carbon economy, exploring the implications for different regions, income groups, and sectors of the economy. By providing quantitative insights into the long-term implications of low-carbon transition policies, this research aims to inform evidence-based decision-making and facilitate the design of integrated strategies for sustainable development and climate resilience.