WHAT IS THREEME?
The transition to a more energy efficient and circular economy will bring about rippling effects throughout the economy. ThreeME’s main purpose is to evaluate the medium and long term impact of environmental and energy policies on the economy. What is the expected reduction in carbon emissions of each policy measure? Which sectors will grow or decline as a result? ThreeME is a model that can quantify these impacts and is particularly well suited to simulate energy transition and circular economy scenarios.
ThreeME stands for Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy and is a macroeconomic model developed by ADEME (French Environment and Energy Management Agency, www.ademe.fr), OFCE (French Economic Observatory, www.ofce.sciences-po.fr) and NEO (Netherlands Economic Observatory, www.neo-observatory.nl).
The model has been applied in various (regional) French studies but also in Mexican, Indonesian, Tunisian and Dutch studies and is continuously adapted to other countries. Most of these studies have been commissioned by national and international organizations and in particular by ADEME, AFD (French Development Agency) or UNEP (United Nations Environmental Programme).
ThreeME combines several important features:
ThreeME is a CGEM (Computable General Equilibrium Model). It therefore takes into account the interaction and feedbacks between supply and demand. Compared to bottom-up energy models, ThreeME goes beyond the mere description of the sectorial/technological dimension by linking those with the global economic system. It can therefore be used to measure direct effects but also indirect effects (such rebound effects) of the energy transition.
Compared to standard CGEM, ThreeME is a neo-Keynesian model that includes market imperfections and under-optimum equilibria (e.g. involuntary unemployment) by assuming slow adjustment of prices and quantities to their optimal level, a combination of backward and forward-looking expectations, a Taylor rule and a Phillips curve.
ThreeME is a hybrid model that combines the top-down approach of CGEMs with the bottom-up approach of energy models. The high level of disaggregation for energy sectors combines consistent monetary and physical data that facilitates the link with bottom-up energy models. Moreover, some bottom-up extensions can be directly integrated in the model: a building module and a transport module define the related energy consumption based on physical characteristics (number of buildings and of kms, energy label, etc.) rather than based on the assumption made in most CGEM where energy consumption is directly related to income through a nested structure of utility function.
ThreeME is a modular model. The modeler can easily turn on and off different modules to adjust the complexity of the model to the needs of the study. This allows for not only high transparency in the modelling assumptions but also for a better interpretation of the modelling results and thus more robust results.