General equilibrium impact of an energy-saving policy in the public sector |
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Authors: | Philippe Quirion Meriem Hamdi-Cherif |
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Institution: | (1) CIRED, 45 bis avenue de la Belle Gabrielle, 94736 Nogent-sur-Marne cedex, France;(2) Laboratoire de météorologie dynamique, (LMD-IPSL), 4 Place, Jussieu, 75252 Paris Cedex 05, France |
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Abstract: | We analyse a disregarded environmental policy instrument: a switch in government expenditure away from energy (or other natural
resources) and toward a composite good which includes energy-saving expenditure. We first develop two variants of an analytical
general equilibrium model. A composite good is produced with constant returns to scale, and energy is imported or produced
domestically with diminishing returns, yielding a differential rent to its owners. The government purchases energy and composite
goods from private firms. Such a policy unambiguously increases employment. It also raises private consumption and welfare
under two conditions: (i) it is not too costly and (ii) the initial share of the resource is smaller in public spending than
in private consumption, or the difference is small enough. We then run numerically a model featuring both importation and
domestic production of energy (oil, gas and electricity), for the OECD as a whole. Simulations show that employment, welfare
and private consumption rise. We provide magnitudes for different parameter values.
Earlier versions of this paper have benefited from conference participants at the European Council for an Energy-Efficient
Economy, International Society for Ecological Economics World Congress, CIRED seminar and EUREQua environmental economics
seminar. We especially thank Michèle Sadoun and two anonymous referees. The usual disclaimer applies. |
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Keywords: | Resource conservation Energy conservation Public spending Employment General equilibrium Multi-sectors models |
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