TheIMF-WorldBankClimatePolicyAssessmentTool(CPAT):AModeltoHelpCountriesMitigateClimateChange SimonBlack,IanParry,VictorMylonas,NateVernon,andKarlygashZhunussova WP/23/128 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2023 JUN ©2023InternationalMonetaryFundWP/23/128 IMFWorkingPaper FiscalAffairsDepartment TheIMF-WorldBankClimatePolicyAssessmentTool(CPAT):AModeltoHelpCountriesMitigateClimateChange PreparedbySimonBlack,IanParry,VictorMylonas,NateVernon,andKarlygashZhunussova AuthorizedfordistributionbyDoraBenedek June2023 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:Tostabilizetheclimate,globalgreenhousegasemissionsmustbecutby25to50percentby2030comparedto2019.Suchanunprecedentedrateofdecarbonizationnecessitatesclimatemitigationpoliciesacrosscountries,notablycarbonpricing,fossilfuelsubsidyreform,renewablesubsidies,feebates,emissionrateregulations,andpublicinvestments.Todesignandimplementeffective,efficient,andequitablepolicies,governmentsneedtoolstoassesseconomic,environmental,fiscal,andsocialimpacts.Tosupportthiseffort,theIMFandWorldBankaremakingtheirjointClimatePolicyAssessmentTool(CPAT)availabletogovernments.CPATisatransparent,flexible,anduser-friendlymodelcoveringover200countries.Itallowsfortherapidquantificationofimpactsofclimatemitigationpolicies,includingonenergydemand,prices,emissions,revenues,welfare,GDP,householdsandindustries,localairpollutionandhealth,andmanyothermetrics.ThispaperdescribestheCPATmodel,itsdatasources,keyassumptions,andcaveats. RECOMMENDEDCITATION:Black,S.,Parry,I.,Mylonas,V.,Vernon,N.,&Zhunussova,K.(2023).TheIMF-WorldBankClimatePolicyAssessmentTool(CPAT):AModeltoHelpCountriesMitigateClimateChange.IMFWorkingPapers,2023/128. JELClassificationNumbers: Q31,Q35,Q38,Q48,H23 Keywords: CPAT;climatemitigation;carbonpricing;instrumentchoice;fiscalincidence;healthco-benefits;transportco-benefits;welfareeffects Author’sE-MailAddress: SBlack@imf.org;IParry@imf.org;VMylonas@worldbank.org;Nvernon@imf.org;KZhunussova@imf.org; *MoredetailsaboutCPAT,includingdetailsongainingaccessforgovernments,canbefoundattheaccompanyingwebpagesoftheIMF(www.imf.org/cpat)andWorldBank(linkavailableontheIMFwebpage).TheauthorswouldliketothankcurrentandformerWorldBankmembersofthejointCPATteamforthepartnershipandcollaboration,includingbutnotlimitedto:DirkHeine,StephaneHallegatte,Jean-FrancoisMercure,DanielBastidas,AlexandraCampmas,IraDorband,FaustynaGawryluk,OlivierLelouch,HeleneNaegele,ChristianSchoder,PaulinaSchulz,StephenStretton,andseveralothers.Inaddition,theteamaregratefulfortheinputofseveralinternalandexternalcontributorswithoutwhomthisworkwouldnothavebeenpossible–alistcanbefoundontheabovewebpages.Lastly,theauthorsaregratefultoJamesRoaf,DoraBenedek,andnumerousIMFcolleaguesforextensivecommentsandtoDanielleMinnett,HopeSamiee,andMoniqueValleforfirstrateresearchassistance. WORKINGPAPERS TheIMF-WorldBankClimatePolicyAssessmentTool(CPAT):aModeltoHelpCountriesMitigateClimateChange PreparedbySimonBlack,IanParry,VictorMylonas,NateVernon,andKarlygashZhunussova1 1AllareaffiliatedwiththeFiscalAffairsDepartmentoftheIMF. TableofContents 1.BACKGROUND3 2.OVERVIEWOFCPATSTRUCTURE6 3.MITIGATIONMODULE11ModelingtheBAUandPolicyScenario11ImpactsofPoliciesonEnergy,Emissions,andAchievementofNDCs12ImpactsonRevenues,GDP,andWelfare13Caveats15 4.DISTRIBUTIONMODULE17TheDistributionalImpactofClimateMitigationPolicies17ImpactsonIndustriesandHouseholdsbeforeRevenuesandResponses18HouseholdIncidenceafterResponsesandRevenueRecycling19Caveats20 5.DEVELOPMENTCO-BENEFITSMODULES:AIRPOLLUTIONANDTRANSPORT20Airpollutionco-benefitsmodule20Caveats22Roadtransportco-benefitsmodule22Caveats23 6.CONCLUSION24ANNEXI–TECHNICALDETAILS:MITIGATIONMODULE25 OverviewofModelStructure25EnergyDemand26EnergySupply27MarketEquilibriumandPricesforAllEnergySectors30MitigationPolicyOptions30EnergySector:KeyAssumptions32ImpactsofPoliciesandTargets42Non-EnergySectors45 ANNEXII–TECHNICALDETAILS:DISTRIBUTIONMODULE49 ImpactsonIndustries(DirectandIndirect)49ImpactsonHouseholds(DirectandIndirect)49UserOptions55 ANNEXIII–TECHNICALDETAILS:CO-BENEFITSMODULES(AIRPOLLUTION&TRANSPORT)_57 Airpollutionco-benefits57Roadtransportco-benefits58 ANNEXIV–CPATAPPLICATIONS59REFERENCES60 1.Background Figure1.GlobalGHGEmissions, NationallyDeterminedContributions(NDCs),andTemperatureTargets 60 Historic 50 Projections Business-as-usual NDCs(2015) OtherNDCs(2023) 40 Methane 30 20 Fossilfuel CO2 10 2°C 1.8° 1.5° 0 1990 2010 2030 2050 Sources:IMFstaffusingCPATandIPCC(2022).Note:Excludeslanduse,land-usechange,andforestry(LULUCF)emissions.BAU=businessasusual;CO2=carbondioxide;GHG=greenhousegas. Globalannu