Essays on Low Carbon Policy Analysis for Abu Dhabi with Computational General Equilibrium Modeling

Abstract

Climate change is a complex environmental challenge that requires comprehensive technological and policy solutions to address. The implementations of low carbon policies, however, are likely to trigger a wide array of spillover effects across the economy as a result of high interdependence of activities in the economic system. This thesis performs computational general equilibrium analyses to analyze the economic and environmental performances of three low carbon policies in Abu Dhabi: (1) utility subsidy reduction, (2) alternative water supply with onboard ballast water desalination and (3) liberalization of the trade of environmental goods. The result shows that (1) a reduction of utility subsidy increases Abu Dhabi's GDP through expanding the high value-added service sector, and decreases carbon emissions by reducing carbon-intensive industrial and utility productions. Meanwhile, average wage decreases as domestic electricity, water and industrial productions decline. It is then desirable to implement the utility subsidy reduction policy along with social programs to sustain wage to mitigate the negative effects of lower domestic productions on household income; (2) onboard ballast water desalination can be a cost effective and low carbon alternative for water production in Abu Dhabi under the baseline scenario. When integrated with domestic onshore desalination, the use of onboard desalinated ballast water increases the GDP of Abu Dhabi with cheaper water production cost. However, the increases of industrial production and household consumption result in higher carbon emissions that out-weight the carbon emission reductions from the water sector. Onboard ballast water desalination is therefore a net carbon emission contributor in the macroeconomic level; (3) a reduction of import tariff for environmental goods leads to slight decreases in both GDP and carbon emissions in Abu Dhabi, with the manufacturing and the construction industries contributing most to the reduction of carbon emissions. Among all proposals developed by international organizations, the OECD proposal is the most effective proposal in reducing carbon emissions. The thesis further analyzes policy interactions between utility subsidy reductions and environmental goods regulation, and shows that the two policies' effects on carbon emission reductions offset each other under policy interaction. In the thesis, a structured framework to integrate general equilibrium analysis with risk analysis is also presented.

Date of Award	May 2014
Original language	American English
Supervisor	Farrukh Ahmad (Supervisor)