This proposed research will survey the theoretical and empirical works in the area of economic growth, international trade, resource depletion, and the environment, and apply the major findings in this area to the construction of an integrated multi-sector multi-region and multi-gas economy-climate model to study the effects of implementing the Kyoto Agreement on the global and European economies. The research is a continuation of an existing work using an integrated economy-climate change model to study the economic costs of stabilizing Greenhouse Gas (GHG) concentration in the atmosphere for the EMF21 Multi-Gas study in December 2003. The proposed research will extend this work by surveying the recent findings regarding the theoretical and empirical links between economic growth, international trade, resource depletion and the environment, and then incorporate the important elements of these links into the existing model. In particular, the research will look at the following issues:
(i) the role of induced technological change in effecting a switch to alternative cleaner fuels and/or improvement in the level of fuel efficiency, and also an improvement in emission abatement technologies,
(ii) the role of ‘induced' or exogenous changes in human behaviour which can occur via changes in consumption, production, or trade patterns which can assist in reducing the emissions levels. The relationship between the ‘technology' and ‘behavioural' elements (called supply and demand, or technique and composition effects) of emissions changes can be studied via a computable general equilibrium model. The model is then linked to a climate change model to study the economy-environment interactions.