Industry-Level Emission Trading in the EU
• CHELEM (WEFA 1998): The CHELEM database supplies harmonized accounts on
bilateral trade between countries.
A shortcoming of GTAP4, with respect to EU policy analysis, is the missing full
disaggregation of the European Union (GTAP4 explicitly represents Germany, Denmark,
Sweden, Finland and the United Kingdom - all other EU member countries are
summarized in an aggregate Rest of EU). We employ EUROSTAT and CHELEM in order
to disaggregate the composite EU region within GTAP, so that we ultimately have all
individual EU countries represented. The IEA data is used twofold in the construction of
the benchmark data set: (i) EUROSTAT has summarized all energy translated transactions
within one single energy branch. However, the analysis of carbon abatement policies
requires the representation of alternative energy carriers. Based on physical energy flows
and respective energy prices, we split down the aggregate EUROSTAT energy sector into
five subsectors: COL, GAS, CRU, OIL, and ELE; (ii) we do a "bottom-up" calibration of
energy demands and supplies for the updated GTAP dataset in order to obtain sector-
specific and energy-specific emission coefficients. Finally, we use the reconciliated
benchmark data for 1995 to calibrate parameters of the CES functional forms from a given
set of quantities and prices.
The second step of the parametrization involves a forward calibration of the 1995
economies to the year 2010. Here, we incorporate exogenous information from two
sources: