We use gTech to simulate how all sectors of the economy may evolve under different economic conditions. This tool allows us to provide insight into how energy and climate policies affect a number of variables, such as:
- Economic activity (e.g., gross domestic product)
- Energy consumption
- Greenhouse gas emissions
- Technology adoption
- Trade of goods and services between regions
- The competitiveness of different sectors
Characterizing household and firm behavior
Each sector is characterized by what it produces (e.g. electricity) and the inputs required in production (i.e., capital, labour, energy and materials). Commodities that are produced can then be sold to other producers (as intermediate inputs), to households (the final consumers of goods produced in the economy), or to other regions and the rest of the world as exports. Commodities can also be imported from other regions or the rest of the world.
Balancing markets for all commodities and services
As the model steps through time, it ensures that markets clear for all commodities and factors by adjusting prices. For example, growth in pulp and paper production may increase demand for electricity in a single region, which must be generated provincially or imported. The price for electricity increases or decreases until supply matches demand.
Altering the structure of the economy
gTech explicitly accounts for how policies or different economic conditions alter the structure and growth of the economy. For example, a policy such as a carbon tax may increase the cost of producing energy-intensive goods and services. As a result, energy-intensive sectors such as paper manufacturing may experience a loss of competitiveness. Lower output of paper will reduce the inputs required by that sector, such as electricity and pulp. As a result, capital and labour are reallocated throughout the economy resulting in growth in other sectors or regions.