The MANAGE model

Short overview

MANAGE is a (recursive) dynamic single country computable general equilibrium (CGE) model designed to focus on energy, emissions and climate change. In addition to the standard features of a single country CGE model, MANAGE includes a detailed energy specification that allows for capital/labor/energy substitution in production, intra-fuel energy substitution across all demand agents, and a multi-output multi-input production structure. MANAGE is a dynamic model, using by and large the neo-classical growth specification, where labor growth is exogenous. Capital accumulation derives from savings/investment decisions. The model allows for a wide-range of productivity assumptions that include autonomous improvements in energy efficiency that can differ across agents and energy carriers. Finally, the model has a vintage structure for capital that allows for putty/semi-putty assumptions with sluggish mobility of installed capital. The model is sufficiently flexible that it can be calibrated to a relatively large number of Social Accounting Matrices (SAM). The latest version of the model incorporates recently developed price/volume splits of the energy sectors and CO2 emissions. The model is implemented in the GAMS software and an aggregation facility is used as a front-end to the model to allow for full aggregation flexibility.

Key features of the MANAGE model

Geographic coverage

MANAGE uses the GTAP's database so it can be tailored to any of these countries or for a regional coalition. The GTAP's database contains 141 countries/regions comprising of 121 countries that account for 98% of world GDP and 92% of world population. MANAGE is a single country model. Thus, each time, the SAM table of the region choice should be imported in the model or, in case of a regional coalition, after completing the appropriate regional aggregation on GTAP databse to extract the SAM table of the regional coalition. Note that this is in accordance to the GTAP version 10. The version 11 is under construction and its pre-released version is expected to be available containing even more new countries or countries that belong to a regional coalition.

Energy system detail

Energy goods are aggregated together into a single energy bundle that allows for substitution across the diferent energy carriers. Energy is assumed to be a near-complement with capital in the short-run, but a substitute in the long-run. The model also allows for both multi-input and multi-output production. This would allow for electricity supply to be produced by multiple activities (thermal, hydro, solar and other renewable forms of electricity production). Energy demand is bundled into a single commodity and disaggregated by energy type using a CES structure that allows for inter-fuel substitution.

Land detail

The model has a single national market for land. Aggregate land supply is specified as an upward sloping supply curve. National land supply is allocated to each sector based on the assumption of perfect or sluggish mobility

Natoural Resources

Natural resources are sector specific and supply is given by an iso-elastic supply curve.

Climate module & emissions granularity

The current model includes carbon emissions only. Carbon, in the current version, is only emitted through the combustion of fuels.

Socioeconomic dimensions

The core baseline scenarios for MANAGE are currently calibrated to the SSP projections provided by the Integrated Assessment community, but could be adjusted based on the country specific data. Labor/population are exogenous and sources include UN Population Division, as well as IIASA. Capital stock is also exogenous within period and it is a function of long-run savings dynamics. The baseline scenario is also used to calibrate labor productivity. The latter is allowed to differ across sectors.

Mitigation/adaptation measures and technologies

Currently, MANAGE's energy & technology detail is limited to the GTAP's Power Data Base. In particular, it includes transmission and distribution, as well as electricity production split into 11 sources (thermal, nuclear, hydro renewables, etc.) which are further split into base and peak load respectively. The main mtigation instrument relies on setting carbon taxes, that is, mitigation policy is limited to direct consumption. Additionally, MANAGE allows for caps on emissions. In this case, the carbon taxes are determined endogenously. Moreover, since MANAGE allows for exogenous changes in productivity, this also includes changes in energy efficiency.

Economic rationale and model solution

Model solution

In MANAGE, each year of a scenario is solved as a static equilibrium, with dynamic equations linking exogenous factors across years with, in addition, update equations for productivity factors. Each static equilibria relies on a relatively standard set of equation specifications. The dynamics of MANAGE is composed of three elements (similar to most neo-classical growth models): population/labor, capital accumulation, and productivity changes, including changes in energy efficiency.

Economic rationale

In general, MANAGE follows a rather standard economic flow linking production, factor income and taxes, and demand (private, public, savings, trade) under closure and equilibrium constraints. More precisely, production structure forms a set of nested constant-elasticity-of-substitution functions, allowing for the aggregation of multiple activities, as well as for shifts in preferences (e.g. RES vs fossil fuels). Demand block consists of three final agents: households, government and investment, where each has a unique expenditutre function. Regardings their incomes, househlds derive incom from factor payments and tranfers, while government's income comes from a suite of taxes and tarrifs. Investment income is driven by savings and depreciation. Factor markets are exactly the following: labor, land, capital and natural resources. Finally, MANAGE incudes a trade block, where domestic supply is allocated across the domestic market and exports, and absorption is allocated between domestic goods and imports, implemented is fixed trade and transport margin

Key parameters

The key features of MANAGE structure are summarized in the following: Capital/labor/energy substitution in production, intra-fuel energy substitution across all demand agents, and multi-output and multi-production structure. Moreover, dynamics of MANAGE are driven by the following key factors: Population and labor force growth rate, capital accumulation (influenced by the national savings rate, foreign savings and unit cost of investment), and productivity changes, including changes in energy efficiency. Regarding pure key modelling parameters, MANAGE like most CGE models is limited to various substitution, transformation and income elasticities. Finally, one of the key features of MANAGE is the multi-input/multi output specification allowing for the aggregation of multiple activities into a single marketed good.

Policy questions and SDGs

Key policies that can be addressed

MANAGE can model a number of key policies including: output tax, tax on sector specific capital use, tax on sector specific capital, output subsidy, export tax or subsidy, tariffs, value added tax,agent specidic commodity tax. Additionally, a carbon tax can be imposed exogenously or determined endogenously with a cap on emissions.

Implications for other SDGs

MANAGE does not automatically calculate the implications on SDGs. However, constituting a multi-sector CGE model with a special focus on energy, it may provide impacts of any policy shock on agricultural goods, clear energy, etc.

Recent use cases

References

Selva, A. C. (2019). Integrating Top-down and Bottom-up Approaches: A CGE Energy Model for a Developing Country.