Dynamic AGE model for water economics in the Netherlands (DEAN-W)

This report presents results of using a dynamic Applied General Equilibrium (AGE) model for the Netherlands to study water issues. We simulate the economic consequences for different emission reduction scenarios ranging from 20 to 50 percent emission reduction from 2015 onwards with respect to emission levels in 2000, and compare these to results for scenarios with a derogation of the target until 2027. As marginal abatement costs for small amounts of reduction are relatively low and autonomous developments (including existing policies) have already established a partial decoupling of economic activity and emissions, a 20% of emission reductions can be achieved through adjustments in the economy that are virtually costless from a macro-economic perspective. Although the production level in the Agricultural sector decreases, this is compensated by increases in the Abatement sector. As the stringency of the policy target increases towards a 50 percent emission reduction, the impacts become visible at the macro-economic level: GDP and NNI levels are decreasing, and the welfare loss, measured via the Equivalent Variation, becomes non-negligible