Economy

• Main Authors: Torstein Bye, Robin Choudhury, Magnus Hardarson, Pall Hardarson
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Published: 2001
• Subjects: Norway; Iceland
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.202.6072; http://www.ssb.no/emner/01/90/doc_200101/doc_200101.pdf

This paper presents the first version of a long-term computable general equilibrium model for the Icelandic economy. The model development has been a joint project of the National Economic Institute of Iceland and the Research Department of Statistics Norway. The motivation behind the construction of the model was to enable analysis of the cost of alternative policies for reducing the emissions of greenhouse gases in accordance with the restrictions set forth in the Kyoto protocol. The modelling framework and initial model were provided by the Norwegians while some further development of various parts of the model and the data work were carried out by the Icelanders. The paper describes the main features of the model. It also contains a discussion of some simulation results. First, a baseline scenario is presented. Then the model is used to analyse the impact of different measures (CO 2 taxes, afforestation and land reclamation, CO 2 quota purchases) aimed at reducing emissions of greenhouse gases from the baseline scenario. The baseline scenario does not assume any increase in metal production from current levels. The analysis assumes land reclamation will be recognised as a CO 2 sink. However, it does not take into account the possible effect of Iceland’s proposal of largely exempting big projects in small economies that use renewable energy sources from the emission restrictions set forth in the Kyoto protocol. The results suggest that the desired emission reductions cannot be accomplished by CO 2 taxation alone. They further indicate that Iceland could meet the emission restrictions with limited adverse macroeconomic impact by combining taxation with increased afforestation, land reclamation