Macro-Modeling At The World Bank

Incorporating climate components into the models calls for supplemental climate-related data that is specific, whether the integration is achieved by coupling with specialized sector models, such as EPM or a biophysical model for crops, or by leveraging their inherent capabilities, such as built-in power sector modeling. MFMod and MANAGE-WB models share a lot of data needs but also rely on different data sources and can have distinct data requirements.

When integrating with a sectoral model—e.g., power sector or biophysical models—common data requirements include:

• Shock by impact channels (e.g., loss of labor productivity due to heat stress per climate scenarios).
• Investment needs (e.g., additional cost of decarbonization strategy, adaptation strategy).
• When adaptation investment is considered, the impact channel shock should reflect the offset intrinsic to the investment.
• Operational expenditure changes (e.g., power costs of AC units, or reduced needs for fossil fuel in the low-carbon scenario).
• Share of imported investment and operational expenditure to determine the consequences for the current account balance.
• Production mix of different low-carbon scenarios.
• Financing strategy for the additional investment (public, private, grants, etc.).

Important notes when integrating sectoral modeling into the macroeconomic framework:

• Macroeconomic projections should be similar. Sectoral models are often partial equilibrium and assume a GDP growth to project demand needs. This projection should be aligned with that of the macroeconomic model.
• Policy framework should be aligned. For instance, if the power sector modeling assumes carbon pricing, the macroeconomic model should consider the government revenues of that policy.

When using inherent capabilities, international datasets with broad country coverage are preferred:

MFMod:

• The majority of inputs originate from IEA World Energy Statistics and Balances, which covers 150 countries. IEA provides structured datasets on trade, supply, and consumption of energy, categorized by product, such as coal, peat, oil, gas, and renewables, and is used in the analysis.
• In terms of emissions, Out World in Data provides inputs on CO2 and other GHG emissions that are compiled for modeling purposes. The dataset provides CO2 emissions by fuel: cement, coal, gas, and oil in million tons, which proves useful when working with a wide selection of countries that differ in energy policies. Additionally, electricity production categorized by source is available and fed into the models.
• Lastly, inputs from IRENA on the costs of renewable power generation and other climate-related variables are collected from the World Bank databases. Recognizing the fact that countries face versatile climate agendas and issues, nationally gathered statistics very often supplement the international sources to guarantee that the country’s specifics are appropriately studied for the final policy suggestions.

MANAGE-WB:

• The core database that includes energy volumes and CO2 emissions is the GTAP database. The latter divides the world into more than 140 countries and regions, of which 120 are countries and the other region-based aggregations. The database divides global production into 57 sectors, with extensive details for agriculture and food and energy (coal mining, crude oil production, natural gas production, refined oil, electricity, and distributed natural gas).

Some of these data projections can be updated with country-specific data assumptions (e.g., on energy reserves or operating prices), which would ideally be provided at the beginning of the modeling project.