ThreeME (Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy) is a macroeconomic model developed by ADEME, OFCE and TNO since 2008.

 

It has been built mainly on a calibration of the French economy, but versions have already been produced for Mexico, Indonesia and the Netherlands.

 

ThreeME will continue to be adapted to more countries in the future.

 

Its main purpose is to evaluate the medium and long term impact of environmental and energy policy measured on the economy at the macroeconomic and sectoral levels.

 

To do so, ThreeME combines two important features.

• Firstly, it has the main characteristics of neo-Keynesian models by assuming a slow adjustment of effective quantities and prices to their notional level, an endogenous money supply, a Taylor rule and a Phillips curve. Compared to standard multi-sector CGEs, this has the advantage to allow for the existence of under-optimum equilibriums, such as the presence of involuntary unemployment.

• Secondly, production and consumption structures are represented with a generalized CES function which allows for the elasticity of substitution to differ between each couple of inputs or goods.

This is an improvement compared to the standard approach that uses nested CES functions which has the disadvantage to impose a common elasticity of substitution between the goods located in two different nested structures.

 

A full description of the Three-ME model: Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy

Appendix C: Equations of the model