Downscaling heterogeneous household outcomes in dynamic CGE models for energy-economic analysis

Abstract

Downscaling methods for dynamic computable general equilibrium models are developed and analyzed. The methods produce outcomes for a variety of different household types by downscaling the aggregate quantities from an economic growth model with a representative household. This approach uses household survey data and long-term population projections for different household types to compare the performance of the downscaling methods vs. a general equilibrium model with multiple household groups under a variety of conditions, including demographic change, technological change, and a carbon tax. Both recursive-dynamic and forward-looking downscaling methods produce results that approximate well a multiple household model run. The recursive-dynamic downscaling method is applied to an illustrative example estimating impacts of a carbon tax on aggregate CO2 emissions and the energy demand of different household groups for a middle of the road development scenario.