MEMLI - The Indonesian Model for Environmental Analysis - Technical Documentation

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The Indonesian model for environmental and macroeconomic analysis (MEMLI) is documented. MEMLI is a 29 sector nation-wide model designated to analyse effects of traditional economic policy measures as well as new policies such as tax-based environmental policies, within the government administration in Indonesia. According to the model changes in energy prices induce factor substitution. Energy in physical units and CO2 emissions due to combustion of fuels are among the variables included. The model captures important elements from the traditions of input-output modelling, general equilibrium modelling and macroeconomic modelling. The report contains the equation structure and simulations of changes in a number of policy variables. According to the model, there is a significant potential for reducing pollution by using the market mechanism without harmful effects on traditional macroeconomic variables.