Electricity subsidies CGE model for Ukraine Subsidies elimination scenario Modelling results Conclusion
Maksym Chepeliev [email protected]
25/03/2014
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF
Distributional Effects of Electricity Subsidies Elimination in Ukraine: A CGE Analysis
Institute for Economics and Forecasting, Ukrainian National Academy of Sciences
Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Outline
Cross subsidization in electricity sector
CGE model for Ukraine
Subsidies elimination scenario
Modelling results
Conclusion
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
5
4
3
2
1
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Cross subsidization scheme
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Electricity consumption subsidies volumes
0
5
10
15
20
25
30
35
Основной
Основной
ОсновнойBusiness consumersHouseholds% of GDP% of Government Budget
bn. U
AH
%
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Electricity consumption subsidies volumes
Основной
Основной
Основной
Основной
Основной
Основной
Households electricity expenditure shareMW-hours of electricity that can be bought for an average salary
%
MW
-h
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Subsidies volumes differentiation
1 2 3 4 5 6 7 8 9 108%
9%
10%
11%
12%
100%
105%
110%
115%
120%
125%
130%
135%
140%
145%
Subsidies distribution by deciles (left axis)Per capita equivalent cash subsidies differentiation (2nd decile - 100%)
Decile number (1 - lowest)
Outline
Cross subsidization in electricity sector
CGE model for Ukraine
Subsidies elimination scenario
Modelling results
Conclusion
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
5
4
3
2
1
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
CGE model for Ukraine: key features
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Is a top-down model.Static.Is based on the Input-Output table for Ukraine and additional information on transfers between economic agents.Is calibrated to a base year (2011).Incorporates heterogeneous households differentiated by income level (10 groups).Production and consumption is modeled via Constant elasticity of substitution functions (CES).Model has extended (multi nested) energy production block.Producers are aggregated into 30 economic activities.
CGE model for Ukraine: circular flow
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Goods and Services
Import Export
Households(max utility)
Entrepreneurs(max profit)
Government
Production factors
Supply of goods and services
Purchase of production factors
Supply of production factors
Purchase of goods and services
Income from production factors
transfers
subsidiestaxes
taxes
Equilibrium conditions:1. Zero profit: no producer earns an “access” profit2. Market clearance: supply ≥ demand for each commodity.3. Income balance: expenditure ≤ income.
Production block structure and simulation procedure
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Input data (SAM, substitution elasticities, labor market etc.)
Model calibration (replication of base year)
Policy assumptions and scenario) (exogenous variables change)
New equilibrium solution
Comparison and policy conclusions
Outline
Cross subsidization in electricity sector
CGE model for Ukraine
Subsidies elimination scenario
Modelling results
Conclusion
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
5
4
3
2
1
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Subsidies elimination scenario
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Elimination component Compensation component
30% reduction; 50% reduction; full elimination.
via production taxes rise; via budget transfers; via partial preservation of
cross subsidization; via progressive taxation
Outline
Cross subsidization in electricity sector
CGE model for Ukraine
Subsidies elimination scenario
Modelling results
Conclusion
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
5
4
3
2
1
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Modelling results
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine Modelling results ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario
Government expenditures
Capital formation
Households income
Output
Основной Основной Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной
Основной S1 (30% subsidies elimination - HHs price increase to 49,7 kop per KW-h)
S1+compensation
S2 (50% elimination - price rise to 66,8 kop)
S2+compensation
S3 (full elimination - price rise to 1,1 UAH)
S3+compensation
Change, % (in a base year prices)
Conclusion and further work
Marc Vielle Methodologies linking energy systems models and economic modelsCoupling a Computable General Equilibrium Model with a Bottom-Up model: Lessons from GEMINI-E3 experiments 2/18
CGE model for Ukraine ConclusionCross subsidization in electricity sector
Maksym Chepeliev Shevchenkivska vesna 2014: Economics
IEF Institute for Economics and Forecasting,Ukrainian National Academy of Sciences
Subsidies elimination scenario Modelling results