An aggregate economic equilibrium model for sustainable energy policy analysis and implications for Turkey

Abstract

This study explores economic effects of various energy and environmental policies for Turkey using an energy-economy-environment aggregate equilibrium model. The model aggregates energy demands, capital requirements and labor inputs under an economy-wide nested constant elasticity of substitution production function. Growing energy demand is met by increased supply produced by various alternatives including a variety of renewable energy technologies. The associated environmental sub model includes feedback links both to the energy sector and economy. A willingness to pay function is used to establish those links. The willingness to pay equation is based on data gathered from a pilot survey, in which the Contingent Valuation Methodology was employed. An increased use of electricity from renewable sources is further encouraged by the endogenous technological learning functions integrated into the model. Results suggest various useful policy implications for an environmentally and economically sustainable development of the country and provide long-term energy policy plans.