Net-zero transition and broader economic policy assessments aim to estimate how effective they are in achieving their economic and climate objectives. Ultimately, the aim is to compare the outcomes and minimise their costs. The new Mésange Vert module extends the scope of the Mésange macroeconometric model to include instructive and worthwhile macro-environmental policy assessment.

Mésange Vert extends the scope of the macroeconomic model Mésange (Modèle économétrique de simulation et d’analyse générale de l’économie) used by the French Treasury (DG Trésor). The new module quantifies the impact of economic shocks and policy reforms on France’s carbon emissions in the medium and long terms. Besides measuring the climate impact of standard shocks, it is also a useful addition to the toolkit for assessing economic and climate policies.

Mésange Vert is structured in two parts: energy and climate. The energy component gives a stylised view of the country’s final energy consumption and how it breaks down between gas, electricity and other sources, while the climate component calculates the carbon emissions associated with this energy profile.

The module is designed to be extremely flexible to use: the default settings include several energy sources (electricity, coal, oil and gas) and two economic agents (households and firms). Other features, such as the method for calculating energy demand and calibrating the model can all be easily adjusted as needed to fit modelling requirements.

Mésange Vert can be used, for example, to analyse and compare the economic and climate effects of a permanent increase in VAT and the carbon tax to generate extra revenue equivalent to one percentage point of ex ante GDP in each case, without recycling the revenue generated. Compared to a VAT increase, putting up the carbon tax would have a slightly lower negative impact on the economy. And, by specifically targeting energy use, the carbon tax option would lead to a far greater reduction in energy consumption than a VAT increase. In addition, the carbon tax would encourage households and firms to switch from fossil fuels to electricity, making the reduction in emissions proportionally greater than the drop in energy consumption.

 

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