Models for the analysis of international interrelations of the EU ETS and of a CBAM. Extended model overview.

Lutz, C., Banning, M., Reuschel, S., Paroussos, L., Fragkiadakis D. & Vrontisi, Z. (2025): Models for the analysis of international interrelations of the EU ETS and of a CBAM. Extended model overview. Climate Change 76/2025, https://doi.org/10.60810/openumwelt%E2%80%908241.

Abstract

Models for the analysis of international interrelations of the EU ETS - Part 3: Extended model overview

The aim of this report is to provide an overview of different models that are, in principle, capable of representing the key topics of this research project: namely, a) the potential “carbon leakage” impacts – in terms of emissions and key economic indicators - which may result from “uneven” carbon pricing, b) policies that address this risk, e.g. a carbon border adjustment mechanism (CBAM), and c) more general, key economic impacts of GHG mitigation scenarios with different total global mitigation ambitions. This includes the two models applied in the project reports “Climate Protection Scenarios until 2050 considering CO2 price differences and carbon leakage” (Lutz et al. 2024a; Lutz et al. 2024b): GINFORS-E and GEM-E3.

First, we present in section 2 key model features that we consider to be central for models for addressing the central project questions stated above. These features refer to their capacity to analyse national and international macroeconomic and feedback effects, as well as their granularity in terms of sectors, countries/regions and technologies, and finally, the statistical dimension. Section 3 then presents an overview of the main types of large-scale models, leading over to a more detailed contrasting discussion of the two model types used in this project: namely, macroeconometric models and computable general equilibrium (CGE) models. The same section then provides table overviews of concrete models of the types energy economic, macroeconomic (i.e., macroeconometric and CGE) modelling, and integrated assessment models. Section 4 describes selected CGE models in more detail, which includes also summarizing overview tables for the CGE models on their main principles and types of assumptions in terms of production, consumption, capital and labour markets, trade, and investment features.

In section 5, we contrast the two models used in our project – GINFORS-E and GEM-E3 - with six other models selected from the overviews in previous sections which we view as possible alternatives for corresponding model simulations of carbon leakage and measures to address it, such as a CBAM. This is done by a detailed factsheet for each presented model.

In the final section 6, based on an overview of available international databases, recommendations for model improvements are developed with a view to a more detailed representation of carbon-intensive industries.