The Green Reform Model: A model of the interaction of the Environment and the Danish Economy

Constructing the model

The computable general equilibrium REFORM model of the Danish economy developed by the Danish Institute for Economic Modelling and Forecasting (DREAM) is currently used by the Danish Ministry of Finance and the Danish Economic Councils to evaluate the long-run effects of policies aimed at improving the performance of the Danish economy. Drawing on the expertise of the DREAM group, the Ministry of Finance plans to build a new macroeconomic model in which the long run equilibrium of the Danish economy is described by the REFORM model. We propose to construct the GREEN REFORM model as a direct extension of the REFORM model. The GREEN REFORM model will be able to simulate the environmental effects of Danish economic activity and the economic effects of policy interventions to meet the targets for Danish environmental, energy and climate policy. 

The GREEN REFORM model will allow

  1. a consistent evaluation of the effects of economic policies on key indicators of environmental quality and
  2. an analysis of the effects of alternative environmental and climate policies on the level and composition of economic activity.

The goal is to develop a modelling tool which will allow the evaluation of economic and environmental policy within a unified conceptual framework that accounts for environmental as well as economic effects, thereby facilitating an integrated assessment of the two types of policy. 

Organization and partners

The work to develop the GREEN REFORM model will be directed by professor Peter Birch Sørensen from the Department of Economics at the University of Copenhagen in collaboration with Peter Stephensen, Research Director of the Danish Institute for Economic Modelling and Forecasting (DREAM). Guidance on data availability and data work will be offered by Chief Adviser Ole Gravgård Pedersen who is directing the work in Statistics Denmark to develop Green National Accounts for the Danish economy.

The modelling work will be carried out under the guidance of an advisory group including representatives from the Ministry of Finance, the Ministry of Environment and Food, Statistics Denmark, the Danish Economic Councils, the Danish Council on Climate Change and a leading international expert on environmental economics and green national accounts. The institutions mentioned have already declared their willingness to offer advice.

Rasmus Kehlet Berg
Department of Economics
University of Copenhagen