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Macroeconomic & Welfare Effects of Energy Policies in the GCC: MEGIR-SA model

Executive Summary:

MEGIR – Model with Energy, Growth and Intergenerational Redistribution – investigates the long-run implications for growth and equity across generations of different energy policies. It is the first general equilibrium model with overlapping generations to be developed and applied for energy policy analysis in the Arabian Peninsula. The version presented here is parameterized on Saudi data. It is a new and thoroughly revised version of the model developed for western countries by Gonand and Jouvet (2015). It is designed specifically for the economies of the Gulf Cooperation Council (GCC) states, particularly insofar as it incorporates an oil-exporting sector and public finances benefiting massively and directly from oil exports.
Its range of applications goes from modeling the impact on growth and inter-generational equity of higher energy efficiency, to the assessment of the effects of different potential fuel mixes and/or end-use energy prices on long-term growth and welfare

distribution by age cohort. The MEGIR-SA model is also well suited to being adapted to include a sovereign wealth fund or for other oil exporting countries. The main advantage of MEGIR-SA is its ability to analyze precisely and simultaneously the effect of energy policies on potential growth and on intergenerational equity. This has some unavoidable cost in terms of modeling other aspects of the economy – e.g., the modeling of the supply side is more simplified than in models incorporating input-output matrix.

This paper provides the detailed technical description of the model that is used in other, companion, policy-oriented, KAPSARC papers. It also gives the characteristics of the baseline, no-reform scenario for the Kingdom of Saudi Arabia (KSA) as assessed by MEGIR-SA

About the Project

Increasing energy productivity holds some of the greatest possibilities for enhancing the welfare countries get out of their energy systems. It also recasts energy efficiency in terms of boosting competitiveness and wealth, more powerfully conveying its profound benefits to society.
KAPSARC and UNESCWA have initiated this project to explore the energy productivity potential of the Arab region, starting with the six GCC countries and later extending to other countries.
Aimed at policymakers, this project highlights the social gains from energy productivity investments, where countries are currently at, and pathways to achieving improved performance in this area.

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