Firms have three main methods for reducing their emissions:
- Output reductions: If a firm produces less output, it will typically also reduce its consumption of energy and material inputs, thereby reducing emissions.
- Input substitution: Firms can in some cases reduce their consumption of emissions-producing energy and material inputs by, for example, investing in more energy efficient machinery or restructuring their production process, such that it requires less energy.
- End-of-pipe technologies: In some cases it is possible to reduce the level of emissions resulting from a given production, without actually changing the production process. Such reductions are typically known as end-of-pipe reductions. An example of this type of reduction is the implementation of a filter in the chimney of a power plant, which reduces the amount of particulate pollution or collects CO2 from the smoke, thereby reducing greenhouse gas emissions.
A classic general equilibrium model already has output-reduction and input-substitution built into the model structure. GreenREFORM must therefore add modelling of end-of-pipe technologies. The goal is also for GreenREFORM to model input-substituting technologies in greater detail than in regular general equilibrium models.
End-of-pipe technologies are characterized by the fact that they can reduce a share of a firm’s emissions for some price per unit. A new method for integrating this type of technology with a general equilibrium model has been developed for GreenREFORM. This method is described in a brief documentation report and an example of how it is used in practice is also available for download.
End-of-pipe emissions abatement technologies in a CGE-model
See example code
The method is described in general terms in the following paper.
Paper about input-displacing abatement
Integration of input-displacing technologies in GreenREFORM is described in a separate note:
Paper about implementation of input-displacing abatement technologies