Macroeconomic cost-effectiveness and the use of multi-sectoral dynamic modelling as an environmental valuation tool
by Martin O'Connor, Grant Ryan
International Journal of Sustainable Development (IJSD), Vol. 2, No. 1, 1999

Abstract: This paper presents a modelling methodology and empirical implementation for ''greened-economy GDP'' estimation, based on the complementarity of economic production and ecological services as sources of economic well-being. The following definition of an environmentally adjusted national product (greened-economy GDP) is adopted: the value (in money units) of the highest (or ''best'') feasible economic production for the accounting period or periods in question, subject to the condition that the economy is respecting a specified set of environmental standards. This provides for the construction of time-series of greened-economy GDP figures (on a period-byperiod basis), which correspond to a scenario of transition towards an environmental performance judged ''more sustainable'' in the long run. The environment is ''taken into account'' not by direct monetisation but through quantification of the opportunity costs for a national economy associated with the respect of specified environmental standards. The dynamic simulation modelling approach M3ED (Modele Economie Energie Environnement Developpement) is presented, as a tool suited to implementation of a scenario approach to the estimation of environmentally adjusted national income figures. Illustrative results are given for the French economy, of the macroeconomic valuation of greenhouse gas emissions abatement actions. The energy sector structure and carbon dioxide emissions reduction prospects for France are quantified by the M3ED analyses, in a preliminary appraisal of the prospects for sustaining the French national income — indicated by final consumption delivered to households — while meeting Kyoto targets for carbon dioxide emissions stabilisation for 2010 by comparison with 1990.

Online publication date: Mon, 10-May-2004

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