AGLINK-COSIMO: Economic Impact on Agriculture of a Low Carbon Economy

Abstract

This paper highlights the work of developing a methodology in the Aglink-Cosimo model of transmitting the impact on agricultural markets of a low carbon intensive economy.

The Aglink-Cosimo model is a recursive-dynamic, partial equilibrium, multi-commodity market model of world agriculture. The model is used to simulate the development of annual supply, demand and prices for the main agricultural commodities produced, consumed and traded worldwide. In the present version it covers 82 countries/regions, clearing markets at the world level for 40 commodities (OECD, 2015; Araujo-Enciso et. al. 2015). Given that the model is a partial model of the global economy, the impact of a low carbon economy cannot be directly evaluated, since the majority of emission reductions are made by other sectors of the economy.

An indirect approach is therefore called for. This involves; i) capturing the macro-economic impact of a low carbon economy in a Computable General Equilibrium (CGE) model and transmitting these changes to the Aglink-Cosimo model, ii) implementing agriculture's contribution to reductions in GHG emissions and iii) taking into account LULUC impacts.

An initial scenario has been under taken where a homogenous GHG tax per ton of CO2eq has been imposed on all developed and developing countries. The results from the model show that global GHG emissions from the primary agricultural sector are reduced by 5 percent in 2030 compared to the baseline, with 3 percent of the total agricultural emission reduction coursed by indirect macro effects (energy, fertiliser, pesticides prices and changes in GDP).