pollutants, taking into account the transportation (between countries) and
transformation mechanism of the pollutants; in a final step the damage generated by
the concentration/deposition of pollutants is computed in physical units and monetised
through a valuation function.
- The model allows to calculate the welfare effects of various environmental policies,
such as taxes and various forms of pollution permits. It is also possible to consider
various systems for revenue recycling.
Figure 1 gives the basic scheme of the standard version of the GEM-E3 model.
Goods Market Equilibrium
PRODUCERS GOVERNMENT CONSUMERS FOREIGN
Income flows and Transfers
SURPLUS OR DEFICIT OF AGENTS
ENVIRONMENT
Figure 1: The standard GEM-E3 model
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