Sustainability Impact Assessment: the Use of Computable General Equilibrium Models

This paper advocates computable general equilibrium (CGE) models as an analytical framework that is suitable for assessing the impacts of policy interference on the three dimensions of Sustainable Development, i.e. environmental quality, economic performance and equity. Methodological extensions of standard CGE models are illustrated that may strengthen the role of CGE models in measuring policies against key criteria of Sustainable Development. These developments include (i) decomposition procedures of general equilibrium effects that deliver a better understanding of key determinants for policy effects, (ii) the embedding of large-scale general equilibrium models in an optimal policy framework that considerably widens the scope of policy analysis, and (iii) systematic sensitivity analysis to test the robustness of model results with respect to uncertainties in the model’s parameterization space. JEL Classification: C68; D58; D61; F17; Q50.