Economy-wide Modeling: An input into the Long Term Mitigation Scenarios process

Abstract

The objective of this analysis is to develop a better understanding of the likely impact that various mitigation options may have on the economy in terms of GDP, employment and household welfare. As noted in the introduction, outcomes of three mitigation scenarios, Start Now, Scale Up and Use the Market, are evaluated. These mitigation scenarios are combinations of different degrees of energy efficiency that can be achieved, structural shifts in energy output mix and, in the case of the latter scenario, economic instruments used to reduce emissions. Results are compared in comparative static fashion against a ‘business as usual’ reference case called growth without constraints (GWC). This remains a scenario analysis, and by no means can we claim that results are necessarily an accurate reflection of the true outcome. Given the long time horizon and the multitude of economic variables and parameters that may change over time and impact on each other, not to mention factors external to the South Africa economy that cannot be controlled, it is unwise to have too much confidence in results. However, the exercise remains useful. We are upfront about the limitations, the assumptions and the methods used to arrive at results, and given these, the scenario analysis provides a useful starting point for policy discussions around possible outcomes under various different mitigation scenarios for South Africa.