Soft-linking a national computable general equilibrium model (ThreeME) with a detailed energy system model (IESA-Opt)

Top-down CGE models are used to assess the economic impacts of climate change policies. However, these models do not represent the technologies and sources of greenhouse gas emissions as detailed as bottom-up energy system models. Linking a top-down CGE model with a bottom-up energy system model assures macroeconomic consistency while accounting for a detailed representation of energy and emission flows. While there is ample literature regarding the linking process, the corresponding details and underlying assumptions are barely described in detail. The present paper describes a step-by-step soft-linking process and its underlying assumptions, using the Netherlands as a case study. This soft-linking process increases the Dutch energy demand levels in 2050 by 19.5% on average compared to assumed exogenous levels. Moreover, the GDP in 2050 reduces by 5.5% compared to the baseline economic scenario. Furthermore, we identified high energy prices as the primary cause of this GDP reduction in the soft-linking process. [Display omitted] •We explain the process of soft-linking a macroeconomic and an energy system model.•We demonstrate the significance of soft-linking in the Dutch energy-economy system.•Linking results in 19.5% higher energy demand levels compared to exogenous levels.•Soft-linking reduces the GDP by 5.5% compared to the baseline economic scenario.•High energy prices of the energy model are the primary cause of the GDP reduction.