Capturing the macroeconomic impact of technology-based greenhouse gas mitigation in agriculture: a computable general equilibrium approach

Abstract

The importance of greenhouse gas (GHG) emissions related to agriculture is gaining momentum in the climate change policy debate, as evidenced by the European Effort Sharing Decision. Food production is important to economic sustainability in many regions and therefore GHG mitigation in agriculture will have notable macroeconomic implications. A theoretically consistent and tractable framework capturing the link between GHG abatement in primary food production and the wider economy is essential to GHG mitigation strategy development in such regions. Computable general equilibrium (CGE) models provide a straightforward approach to compare the economic and environmental impacts of price/quantity-type policy instruments to meet emission abatement obligations. However, capturing changes to emission intensity associated with agriculture is not nearly as developed in the CGE literature, which has focused on the energy sector. This paper considers alternative approaches to modelling abatement technology in a CGE framework, and illustrates an approach that utilizes standard models available to explore strategic implications of local–regional abatement options. The case study considered is Northern Ireland, a small regional economy with a relatively large proportion of economic activity related to the food supply chain.