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Introduction to GreenREFORM

GreenREFORM is an environmental and climate-economic model for the Danish economy, which is currently in development in collaboration between DREAM and researchers from the University of Copenhagen and Aarhus University.

Goal

The goal is to develop an analytical tool that allows for an integrated and consistent assessment of the environmental and climate effects of economic policies, as well as the socioeconomic effects of environmental, energy and climate policies. An important premise for this, and a goal in itself, is that the baseline simulation of the model should provide a comprehensive assessment of how future economic development is expected to affect the environment and climate. Further, the baseline simulation should assess whether this development is compatible with the political goals within these areas.

Description

To assess the future impact on the environment and climate, a model must have a particularly high level of detail in the sectors where the impact is greatest. The development of GreenREFORM is therefore focused on developing sub-models, which among other things describe the energy, transportation, agriculture and waste management sectors.

On top of these sub-models, a main model is being developed in the form of a computable general equilibrium model (CGE-model), which describes the total economic activity in Denmark and combines the results of the sub-models. GreenREFORM is being designed as a fully integrated model system, where all of the sub-models and the main model interact and are solved simultaneously.

Like the multi-sector model REFORM, the main model will include a large number of sectors. However, unlike REFORM, which does not account for the transition of the economy over time (a static model), GreenREFORM, similar to MAKRO, will be developed as a so-called dynamic model, which describes economic development year by year.

Development of the model is based on the model structure and the technical framework, which has been designed by DREAM for MAKRO. However, the level of detail will in certain areas vary significantly between the two models. In GreenREFORM, sectors that are particularly impactful on the environment or the emission of greenhouse gases, such as the energy, transportation, agriculture and waste management sectors, will be modelled at a high level of detail, while other areas, which are of focus in MAKRO, will be modelled in less detail.

Read more about GreenREFORM in the project description

Project Development

The objective of the project is to have a final model ready by fall 2021, fulfilling the specified goals and with a technical setup that allows it to be used with relative ease.

The ambition is that GreenREFORM will be integrated with the tool set of relevant authorities, think tanks, interest groups etc., and that the model as well as the underlying data will be freely available to the extent possible.

The project was started by Peter Birch Sørensen, whom in 2016 formulated the research project “THE GREEN REFORM MODEL: A Model of the Interaction of the Environment and the Danish Economy”. The Carlsberg Foundation financed the project with 6.05 mio. DKK. In addition, the Economic Policy Research Network contributed 0.25 mio. DKK to the University of Copenhagen and the KR Foundation contributed 0.25 mio. DKK to finance the development of the model in the DREAM group. In 2019 the Danish Ministry of Finance joined the project by funding the creation of a dedicated model group with four economists and four research assistants as part of DREAM group. The grant from the Ministry of Finance is for 6.76 mio. DKK and runs over two years from October 2019. 

Read more about the organization of the GreenREFORM project