Economic benefits of Northeast Asia energy interconnection: A quantitative analysis based on a computable general equilibrium model

Abstract

There has been an intense discussion on the energy infrastructure cooperation in Northeast Asia. Most studies have focused on the technical feasibility of grid interconnection, deployment of renewable energy, and have ignored the quantitative analysis of social and economic benefits of these proposals. This study uses a computable general equilibrium model to evaluate the effects of energy interconnection in Northeast Asia. Key model development tasks include 1) constructing a new nesting structure, 2) econometrically estimating the constant elasticities of substitution (CES) between fossil- and non-fossil-power generation bundles, 3) developing a new base-case scenario, and 4) developing the policy scenario. We found that while Northeast Asia will benefit from energy interconnection development with higher GDP than in the base-case; there will be a trade-off between higher investment and lower consumption. Sector results and environmental implications in this region are also discussed.

Keywords

• Global Energy Interconnection
• CGE
• Economic impacts
• Northeast Asia