CliMAT-DGE: New Zealand’s Climate Integrated Assessment Model
What does CliMAT-DGE do?
The Climate Mitigation, Adaptation and Trade in Dynamic General Equilibrium (CliMAT-DGE) model analyses the responses of the New Zealand economy to changes in domestic and foreign environmental policy and/or trade patterns. It can be used to analyse questions such as:
- What effect will a particular policy scenario have on reducing greenhouse gas emissions?
- How will regions, industries or sectors be affected by greenhouse gas emissions reduction policy?
- How will the policy impact regional trade and/or commodity prices?
- What impacts will climatic changes have on primary production?
How is CliMAT-DGE configured?
CliMAT-DGE is a top-down dynamic, multi-sectoral and multiregional CGE model that describes the global economy and generation of greenhouse gas (GHG) emissions from energy and non-energy sectors through 2100.
The model represents all transactions for a particular year that take place within the economy, in a regional, national or worldwide context. Because the model has been calibrated for multiple years, it is suitable for dynamic analysis incorporating long-term issues such as climate change and greenhouse gas emissions reduction policies.
CliMAT-DGE currently uses 20 aggregated economic sectors, including detailed energy and primary production sectors. The energy sectors include major GHG emitters, as well as carbon-free electricity, which is a significant part of New Zealand’s energy share. The primary production sectors are aggregated to focus on land and food sectors including dairy, sheep & beef, forestry, and grains.
Model outputs are produced at the regional and sector level and listed in annual values (2007 base year) and include:
- Gross domestic product – consumption, investment and trade flows (exports and imports)
- Production – output value
- Output price – relative change from 2007
- Greenhouse gases – emissions by gas (CO2, CH4, N2O, etc.)
- Input use – capital, labour and land
Why was CliMAT-DGE developed?
Global CGE models (e.g. the GTAP model) typically aggregate New Zealand together with larger economies (e.g. Australia, Canada). This makes it difficult to determine the effects of international climate policies on New Zealand. CliMAT-DGE was developed to overcome this. It is a global dynamic economic model with a strong focus on New Zealand as a distinct region.
How does CliMAT-DGE work?
The CliMAT-DGE model framework is loosely based on the dynamic version of the MIT-EPPA model with adaptations for the New Zealand context. The model primarily uses the Global Trade Analysis Project (GTAP) version 8 dataset that accounts for 129 regions of the globe and 57 economic sectors. It is calibrated to 2007, the most recent GTAP year.
Figure 1 provides a simple depiction of how the flow of income in the economy is represented in CliMAT-DGE to illustrate how the model works. The consumer sector (households) supplies factor inputs such as capital and labour to the producer sectors (firms). The producer sector, in turn, produces goods and services that are demanded by consumers. There is a reverse flow of payments, where households receive income for the factors they supply and then use that income to purchase the goods and services they consume. The government sector is not included in this figure as this sector is modelled as a passive entity that simply collects taxes from producers and transfers the full value of these proceeds to the households. Trade flows for goods between regions/countries as also accounted for. Our technical report documents the structure of the model.
Who developed CliMAT-DGE?
CliMAT-DGE was developed by a research consortium led by Landcare Research. Collaborating organisations included AgResearch, the New Zealand Agricultural Greenhouse Gas Research Centre, the New Zealand Institute of Economic Research, and Lincoln University. Development funding was provided by the Ministry for Primary Industries through the Sustainable Land Management and Climate Change Fund.