Linking Energy System and Macroeconomic Growth Models - Is the Supply Curve Enough?

Analysing interactions of the energy sector and the overall economy are of interest to improve science and policy advice. Macroeconomic growth models (MGM) and energy system models (ESM) are available to represent these two sectors. These models can be linked by two approaches. The hard-link approach completely integrates the ESM into the MGM. In the soft-link approach both models are solved in isolation and information is exchanged between them in a iteration process. This is done by reducing the full-scale dynamic ESM into a reduced form model consisting of a set of static energy supply functions. The soft-link approach attracts interest because it could enable the analyst to use more detailed models of both sectors. However, the solution is at best an approximation of the hard-link approach. Although the ∗Corresponding author: CH-5232 Villigen, Switzerland. Tel.: ++41 +56 310 4740. E-mail: [email protected].