Economic and fiscal forecasts guide budget formulation. These are prepared using assumptions about how the economy will shape the public finances, and vice versa. Unbiased economic assumptions are crucial to avoiding revenue shortfalls and unplanned spending pressures. To prepare more accurate and objective forecasts, governments are opening up the forecasting process and subjecting assumptions to rigorous review. They are also communicating more about the uncertainties and risks associated with the budget forecasts, and how this affects spending plans.
Quality Budget Institutions
Developments in OECD Countries
Abstract
Economic assumptions support forecasts of the economy and public finances. They include projections of key economic indicators (e.g. future growth, inflation rates and demographic changes) and how these are expected to impact government revenues, expenditures and public debt.
These assumptions are used by the government to plan the budget. Macroeconomic and fiscal forecasts can estimate the impact of budget policies on the government’s fiscal objectives and rules. More detailed planning assumptions are used by the CBA and line ministries to update expenditure baselines.
Economic and fiscal forecasts also help the government communicate a clear narrative for the budget, explaining how the economy influences public finances and how the government’s policy decisions will impact the economy and people’s livelihoods.
However, in practice, no forecast can be perfect. Economies are complex and behaviour is difficult to predict, which makes all forecasts uncertain. Preparing economic and fiscal forecasts also involves significant judgment. This can lead to questions about how economic assumptions are made and by whom.
Governments can show that their economic assumptions are objective by subjecting them to rigorous review and inviting independent inputs. Governments should also disclose analysis of uncertainty in the budget forecasts and how this uncertainty will be managed to minimise the impact of potential revenue shortfalls or unplanned spending pressures.
2.2.1. Economic forecasts and public finances
Governments prepare a wide range of forecasts to support decision-making in the budget process. However, budgeting relies mainly on two sets of forecasts in particular: forecasts of the economy and fiscal forecasts covering revenue and expenditure baselines. Over time, these have been supplemented with other projections, including the longer-term economic and fiscal outlook.
Macroeconomic forecasts are used to anticipate changes in the economy as a whole. They provide important planning assumptions for budgeting preparation, including estimates of GDP growth, inflation, wages and salaries and unemployment. They can also help understand how tax and spending decisions influence economic activity.
The main macroeconomic forecasts are prepared using large-scale models that cover all four sectors of the economy (real, fiscal, external and monetary) and predict how these will be influenced by changes in the domestic economy and from abroad. These models help apply judgements about how the economy works in a predictable and consistent way using national accounts and other data.
Projections of government revenue and expenditure are usually prepared separately, drawing information from the macroeconomic forecasts. Approaches vary, but many countries will prepare separate forecasts for specific taxes, which are then aggregated in the main macroeconomic model and in the MTBF to provide the overall picture.
The approach to forecasting expenditures differs from the revenue forecasts. Expenditure baselines are mostly guided by estimates of government spending plans under different ministries, taking into account parameters such as inflation or employment levels. Two common exceptions are social security payments and debt interest. Social security payments can be estimated in a similar way to tax revenue, with specific models used to forecast different benefits based on information about the entitlement policy and the people who will claim those entitlements. Interest payments are estimated using projections of future interest rates and government borrowing.
2.2.2. Forecasting in the budget process
The main economic and fiscal forecasts are used in budget formulation. In many countries, this means that there are two official forecasts published each year: one for the pre-budget statement and one for the budget. This is sometimes complemented by forecasts for internal planning, as has been the practice in Sweden (Downes, Moretti and Shaw, 2017[1]).
Forecasts will be developed iteratively, with a “base case” forecast that is updated through the budget process to incorporate new policy measures:
Updating “base case” projections: The process typically starts by updating projections with the latest data and analysis. Key variables from this initial projection are then shared with the teams that will forecast individual taxes and prepare updated expenditure baselines. Those detailed forecasts are then returned to the economic forecasting team, reviewed and incorporated into the macroeconomic model to produce the “base case” forecast.
Incorporating new measures: The next phase of forecasting incorporates the policy changes that will be announced through the budget. This process may involve several iterations as measures are identified, modified, or dropped during budget negotiations. Forecasters may also incorporate new data and refine the assumptions used in the base case projections.
Finalising the budget forecast: Once all budget measures have been agreed, the final forecasts are prepared and published as part of the budget statement.
This process takes several weeks. Agreeing on a firm schedule with ministers can improve forecasting and make the budget process more orderly. Shortening the period between the base case and the final economic forecasts reduces the risks of significant changes to the forecasts and the budget envelope, which can undermine the finance ministry’s credibility in negotiations. Setting a reasonable deadline for deciding all budget measures ensures that the final budget forecasts will be comprehensive.
2.2.3. Assessing long-term fiscal sustainability
A growing number of countries prepare macroeconomic and fiscal forecasts that aid long-term fiscal sustainability analysis. The OECD SBO Survey on Budget Frameworks reported that 30 OECD countries produce a long-term fiscal sustainability assessment, typically covering periods between 31 and 50 years (Figure 2.1). These long-term projections do not usually underpin the preparation of the budget in the same way as the main macroeconomic and fiscal forecasts. Instead, they raise awareness of the risks to fiscal sustainability that extend beyond the normal horizons of budget planning, such as demographic shifts. This also reinforces public debate over inter-generational fairness.
Long-term fiscal sustainability analysis is often published as a standalone publication, as was the practice reported by 22 countries. In ten countries, the assessment was integrated as part of the budget document (OECD, 2023[2]). The frequency of reporting also varies. Australia publishes its Intergenerational Report every three to five years to provide an outlook for the economy and the budget over a forty-year period. In contrast, Sweden publishes a fiscal policy sustainability assessment annually as part of the Spring Budget Bill.
Length of long-term fiscal sustainability assessments in OECD countries
Note: Data for Lithuania and Mexico are not available. Data refer to long-term fiscal sustainability assessments prepared by either government bodies or Independent Fiscal Institutions. Costa Rica, France, Greece, Israel, Poland and Türkiye do not prepare a long-term fiscal sustainability assessment. France, Greece and Poland include a chapter on long-term sustainability of public finances in the Stability Programme Update published and submitted to the EU each April. Costa Rica includes debt projections until 2035 in the Fiscal Framework Document 2023-2028. Other includes, but is not limited to, multiple long-term forecasts of different durations (Denmark, Italy) and forecast beyond 50 years (Denmark, Sweden, United States).
Source: OECD (2023), Senior Budget Officials Survey on Budget Frameworks, Question 32.3.
2.2.4. Institutional arrangements for setting economic assumptions
In two-thirds of OECD countries, both macroeconomic and revenue forecasts are prepared by the ministry of finance (Figure 2.2). However, it is more common for finance ministries to take a lead preparing the official revenue forecasts for the budget (32 countries) than for macroeconomic forecasting (22 countries). Within the finance ministry, the CBA tends to play a greater role in co-ordinating revenue forecasts (14 out of 32 countries) than macroeconomic forecasts (7 out of 22 countries); but usually these forecasts are prepared by other units of a finance ministry. The central forecasts may draw on projections for individual taxes that are prepared by the tax administration and expenditure baselines that are calculated by line ministries.
Several OECD countries have given responsibility for macroeconomic forecasting to a ministry of economy (Spain), an IFI (Belgium) or independent government office (Slovenia), the central bank (Costa Rica) or research institutes (Austria). In Türkiye and the United States the office of the president plays a lead role in preparing the executive’s budget proposal and associated forecasts. The United Kingdom is unique in giving an IFI the responsibility for both the macroeconomic and revenue forecasts that are used for budget preparation.
Number of OECD countries, 2023
Note: Data for Lithuania and Mexico are not available. Other includes, but is not limited to, the preparation of forecasts by the office of the president in collaboration with the Ministry of Treasury and Finance (Türkiye for revenue and macroeconomic forecasts); the central bank (Costa Rica for macroeconomic forecasts); an independent research institute (Austria for macroeconomic forecasts); or an independent working party (Germany for revenue forecasts).
Source: OECD (2023), Senior Budget Officials Survey on Budget Frameworks, Question 6.
Long-term fiscal sustainability assessments can be prepared by the government or by an IFI. In 17 OECD countries, the main responsibility for long-term fiscal sustainability assessments is with the CBA or another entity within the ministry of finance. In seven OECD countries the main responsibility lies with IFIs (OECD, 2023[2]). However, nearly two-thirds of IFIs report that they carry out long-term fiscal sustainability analysis, which reflects their growing role in overseeing the long-term health of the public finances, even if they do not have the lead responsibility for preparing fiscal sustainability analysis in a country (OECD, 2021[3]).
Economic assumptions are objective when they are guided by systematic, evidence-based methods and are independent of political influence. To demonstrate that economic assumptions are objective, forecasts – and the forecast process – should be transparent, subject to regular and rigorous review, and open to independent inputs.
2.3.1. Public disclosure
Publishing information on the government’s economic assumptions helps demonstrate the quality and impartiality of the forecasts. This strengthens the credibility of the government’s fiscal plans and supports confidence in the markets and the public. Greater external scrutiny also encourages forecasters to look for ways to improve their projections.
As good practice, all key economic assumptions that underpin the budget should be disclosed. This includes the forecast for GDP growth, the composition of GDP growth, the rate of employment and unemployment, the current account balance, inflation and interest rates. Other good practices include:
Deviations from previously applied assumptions should be highlighted.
Forecasts should be accompanied by an explanation of uncertainty and any adjustments for risk to provide a cushion against an unexpected downturn or shock to the public finances.
Transparency should also apply to the forecast process and tools, including the input files and models used to prepare the forecast.
OECD countries generally follow these good practices, particularly for their macroeconomic forecasts (Table 2.1). Fewer countries publish risks associated with the forecasts of tax revenue. Similarly, while some countries publish the details of their macroeconomic model, this practice does not always extend to the smaller models used to estimate specific revenues and expenditures.
Note: Data for Lithuania and Mexico are not available. Other includes the submission of macroeconomic forecasts to a panel of private sector experts (Japan) and benchmarking revenue forecasts between the finance ministry and tax administration (New Zealand).
Source: OECD (2023), Senior Budget Officials Survey on Budget Frameworks, Question 7.
2.3.2. Rigorous review
Economic assumptions should be reviewed throughout the forecast cycle. This will involve different forms of analysis to establish, monitor, and review economic and fiscal projections. Each review should follow a structured and systematic method of enquiry.
Each forecast is prepared using updated assumptions, backed by new data and analysis. As part of this process, forecasting units will dedicate significant time to refining their models and understanding important trends and variables that impact the macroeconomic and fiscal forecasts. They also scrutinise the inputs from other ministries and agencies and different parts of the finance ministry. Some governments have established formal working groups or processes that guide this scrutiny and co-ordinate the forecasts.
The final economic assumptions are usually documented in the budget or a separate report that accompanies the macroeconomic and fiscal forecasts. In some cases, the finance ministry discloses the research that feeds into their projections. In 2024, for example, the New Zealand Treasury published a paper on the implications of “the productivity slowdown” for forecasts and projections. Several IFIs also publish working papers sharing details of how their assumptions are updated through rigorous research or changes to modelling methods.
Close monitoring of leading economic indicators and in-year budget execution can improve the accuracy of the forecasts that underpin the budget. Some finance ministries and IFIs have adopted nowcasting models to assess economic data on a monthly, daily or continuous basis to track the economy in between the publication of national accounts data. Monitoring of the public finances tends to be monthly, involving a mix of outturn data and preliminary forecasts for revenue, expenditure and government borrowing. Line ministries may be asked to update their multi-year expenditure baselines during the financial year in order to track the changing profile of public spending as policies are refined and new assumptions are made.
Using a rigorous framework for reviewing errors in economic assumptions can help improve the next forecasting cycle (Cameron, 2022[4]). The majority of OECD countries run ex post analyses to understand the performance of economic and fiscal forecasts used in past budgets. In 2023, 25 out of 36 reported that they review differences between successive versions of either the macroeconomic or revenue forecasts, or both, and that these are quantified and explained (noted in Table 2.1, above).
There will also be opportunities to improve the tools, organisational arrangements and processes for forecasting. Opening up these processes to external assessment can help to assure stakeholders that the government is using appropriate tools and has the capacity to generate the analysis needed to support budget policy making. Box 2.1, for example, summarises the findings of a review of the tools and analytical capacity of Belgium’s Federal Planning Bureau, which prepares the official macroeconomic forecasts.
Belgium’s Federal Planning Bureau was established in the late 1950s as one of the earliest IFIs. The Bureau stands out among IFIs as having a broad mandate that includes providing macroeconomic forecasts for the budget and direct analytical support for the government in areas such as distributional analysis and sectoral modelling (e.g. energy prices).
An OECD assessment in 2023 benchmarked the Bureau against international best practices for IFIs and reviewed the 12 models used to fulfil the Bureau’s broad responsibilities. Four models were used for preparing macroeconomic projections over different timeframes (quarterly up to 50 years) and for different regions. A further four models were used for preparing distributional analysis. The analytical models were assessed against seven principles: theory; accuracy; communication; transparency; proportionality; sustainability; and precedent.
The review concluded that the tools used by the Bureau were sophisticated when compared to most other IFIs. It also provided suggestions where the Bureau could strengthen its modelling capacity for specific needs or to reflect good practices seen in other IFIs with similar mandates and resources. These included the capacity for nowcasting, estimating potential output and the output gap, and adjusting policy costings to account for behavioural responses.
Source: OECD (2023[5]).
2.3.3. Independent inputs
Governments can also signal their commitment to using objective economic assumptions by inviting independent inputs into the fiscal forecasts. This can improve the accuracy of economic assumptions and help explain errors. Different approaches range from inviting independent expert scrutiny over the government’s projections, using independent benchmarks and even outsourcing forecasts entirely, with some countries like Germany employing a mix of approaches (Box 2.2).
Governments can draw on experts to comment on the official forecasts. In Slovakia, the macroeconomic forecasting committee endorses the economic forecast prepared by the Institute of Financial Policy of the Ministry of Finance. This committee comprises 10 independent institutions which provide an opinion on the official forecasts. At least half of the committee has to judge the forecast to be either prudent or realistic in order for the forecast to become official (Moretti, Keller and Chevauchez, 2019[6]). Other OECD countries have invited scrutiny through expert panels, independent research institutes and SAIs.
Many OECD countries benchmark their economic assumptions against the forecasts prepared by other forecasters, including the central bank, economic research institutes, international organisations and private sector forecasters. Portugal and Sweden summarise forecast comparisons in the budget documents. Benchmarking provides a reference to understand different judgements and models and helps the government to communicate that its assumptions are reasonable. In Germany, the independent Joint Economic Forecast serves as the main benchmark forecast for the government. While there is no legal requirement for the government to adopt the Joint Economic Forecast for budget planning, the official government projections rarely deviate significantly from the benchmark provided (OECD, 2015[7]).
The benchmark model has been extended to other variations in the way forecasts are prepared, most notably by increasing the independence of forecasts that are officially adopted by the government for planning and budgeting. Canada uses “consensus-based variables” as inputs into the macroeconomic forecasts and budget preparations. Since 1994, the Department of Finance Canada has used the average values of economic forecasts prepared by private sector economists. The contributors, the parameters and underlying assumptions are summarised in the budget and economic statements. A similar process has also been used in Chile for forecasts of the output gap and copper prices.
A number of other OECD countries have given the responsibility for macroeconomic forecasting to an arm’s length body or other independent entity. In Luxembourg macroeconomic forecasts are prepared by an agency under the Ministry of Economy. In Austria, the official macroeconomic forecast is published four times a year by the independent, non-profit Austrian Institute of Economic Research.
Germany has a long history of inviting independent inputs into its economic assumptions, and into fiscal policy more generally. The process for preparing macroeconomic and fiscal forecasts involves several independent (or semi-independent) institutions, including:
Council of Economic Experts (Sachverständigenrat, est. 1963): An independent statutory body established to assess macroeconomic developments and advise policymakers, the Council comprises five economists appointed by the federal government for five-year terms. The Council publishes an economic report in November that includes analysis of economic trends, fiscal policy, and structural issues. While advisory in nature, the government will respond through its own Annual Economic Report in January, which includes the official economic forecasts.
Joint Economic Forecast (Gemeinschaftsdiagnose est. 1950): Commissioned by the Federal Ministry for Economic Affairs and Climate Action, the Joint Economic Forecast is prepared twice per year by a consortium of independent economic research institutes. Each institute will usually publish its own forecasts separately using different models and assumptions. The institutes meet to prepare a consensus forecast that serves as a reference for the government’s official projections published in April and October. The process ensures that the government’s economic assumptions are generally aligned with a broadly accepted expert consensus.
Working Party on Tax Revenue Forecasting (Arbeitskreis Steuerschätzungen est. 1955): The working group includes representatives from the Federal Ministry of Finance, the Länder (states), municipalities, the Bundesbank, the Federal Statistical Office, and independent economic institutes. Twice per year, following the Joint Economic Forecast, the group publishes revenue forecasts, which are then adopted by the government and used to prepare the federal budget and medium-term financial plan.
Together, these bodies and their analysis support prudent and realistic assumptions for budget preparation. They also contribute to public understanding and debate over economic and fiscal policy.
Source: OECD (2015[7]).
2.3.4. Economic assumptions and the role of IFIs
The majority of OECD countries have IFIs, such as a parliamentary budget office or a fiscal council. These organisations typically have a mandate to assess, and in some cases provide non-partisan advice on, fiscal policy and fiscal sustainability. This makes IFIs an important partner in ensuring that economic assumptions are objective.
IFIs are a key source of “independent inputs” into the government economic and fiscal forecasts. Survey data for the 29 OECD countries with an IFI in 2021, showed that the most common mandates for macroeconomic forecasting are (OECD, 2021[3]).
Providing external scrutiny of the government forecast by endorsing the forecast (11 countries out of 29 countries with IFIs) or assessing its reasonableness (16 countries). Many OECD countries also publish an ex post evaluation of the accuracy of economic projections (15 countries).
Publishing an alternative (or benchmark) macroeconomic forecast (9 countries).
Only in three OECD countries is the IFI mandated to prepare the official government macroeconomic, or revenue forecast. Three countries have outsourced macroeconomic forecasts to an IFI (Belgium, the Netherlands and the United Kingdom). The United Kingdom has extended this responsibility to fiscal forecasts, which are prepared by the Office for Budget Responsibility (OECD, 2021[3]).
Finance ministry officials in OECD countries recognise the benefits of external monitoring of economic assumptions. Scrutiny from IFIs helps avoid blind spots and groupthink. External endorsement also reinforces the legitimacy of forecasts for the finance ministry’s negotiation partners in line ministries and among other stakeholders. Definitively comparing forecasting regimes is difficult because many factors influence the accuracy of economic and fiscal projections. However, effective IFIs are often associated with more accurate and less optimistic economic and fiscal forecasts.
Uncertainty in the macroeconomic and fiscal forecasts creates a fiscal risk – the possibility that budget plans will turn out worse than expected. While fiscal pressures, such as ageing populations, are factored into the economic and fiscal projections, fiscal risks may materialise and result in potential deviations from those projections.
One source of fiscal risk comes from the assumptions made in the forecast. Accurately predicting the business cycle is notoriously difficult, for example, but estimates of the output gap can significantly impact projections for economic growth. Many OECD countries also set fiscal objectives or rules using cyclical or structural measures of the budget deficit or budget balance, meaning that ceilings are based on estimates of potential output, which are often revised. However, there are many other sources of fiscal risks, which range from the possibility of macroeconomic shocks to uncertain budgetary claims (see Chapter 7).
2.4.1. Prudent and central forecasts
One way to manage fiscal risk is to build “safety margins” into forecasts. Specifically, finance ministries aim to avoid making overly optimistic assumptions, where the fiscal position turns out worse than predicted. When this happens, the government will face greater challenges maintaining control over the public finances. This creates a choice between using a prudent or central forecast.
Some countries explicitly adopt a “prudent” forecast where, on average, the economy is likely to perform better than initially projected. Germany has historically adopted prudent economic assumptions with the government using more conservative assumptions than those offered by the Joint Economic Forecast that serves as the main reference. Chile, Sweden and Norway have also used prudent macroeconomic or tax forecasts as a basis for budget planning.
Prudent economic and fiscal forecasts can provide a buffer for fiscal management. When forecasts are revised, they will usually offer the government additional fiscal space. That can help stay on track with fiscal objectives and may also give some flexibility to allocate additional resources to meet emerging spending pressures, including changing government priorities.
Other countries aim to use a “central” forecast where the government believes that the actual outcomes are as likely to be above expectations as they are to be below. A central forecast means that fiscal buffers have to be provided through other mechanisms, such as a reserve or contingency fund, or by allowing revisions to expenditure ceilings.
A central forecast can strengthen the credibility of budget controls by reducing the expectation that additional funding can be found to accommodate new spending increases or tax cuts. This may also reduce the risks of making fiscal policy more procyclical, as “windfalls” will be higher when the economy is growing.
2.4.2. Sensitivity analyses, scenarios and risk reporting
Forecasters need to be able to identify and communicate the degree of uncertainty associated with their projections. A good understanding of uncertainty and risk helps ministers make budget decisions based on a balance of risks. Disclosing information on uncertainty and risk also supports the public debate on budget policy, which will usually focus on the headline economic and fiscal forecasts.
Three common practices are used to quantify and present uncertainty in the macroeconomic and fiscal forecasts:
Sensitivity analysis of how alternative assumptions for key economic variables would change the forecast for the public finances. That might look at how slower or faster productivity growth would impact the economy and tax revenues, if all other assumptions remained unchanged, for example.
Alternative economic scenarios are both presentational (to help illustrate important sensitivities) and analytical (by simulating changes to multiple variables at once). Scenarios are sometimes used as a stress test for the forecasts, showing how a major shock would affect the public finances through different channels (e.g. by triggering calls on government guarantees).
Probabilistic forecasts that use a range of possible projections with different margins of error. This may use historical forecast errors, or it can simulate many different scenarios based on the likelihood of those scenarios actually happening (Steel, 2021[8]).
Twenty countries reported using sensitivity or scenario analysis, with 14 using both. A smaller group of six countries used probabilistic forecasts (Figure 2.3). However, the use of “fan charts” to illustrate the uncertainty of forecasts is a well-recognised good practice.
A common challenge for reporting uncertainty and fiscal risk is to ensure the information is accessible and understandable. Many significant fiscal risks are uncertain. They are often long-term in nature and costly to prevent or mitigate. Publishing fiscal risk reports can help to promote more informed public debate. To serve this purpose well, they need to be clear and highlight material risks to the public finances.
Number of OECD countries reporting each practice, 2023
Note: Data for Lithuania and Mexico are not available. Other incudes publishing analysis of fiscal risks discussion of fiscal risks in separate publications for macroeconomic forecasts (Denmark) or in the Economic and Fiscal Update (New Zealand).
Source: OECD (2023), Senior Budget Officials Survey on Budget Frameworks, Question 7.1.
2.4.3. Integrating climate change into macroeconomic forecasts
With rising global temperatures, countries are predicted to face more frequent and severe extreme weather events, including floods, droughts, and heatwaves. This is likely to lower GDP, reduce tax revenues and require additional government spending to repair damage and help businesses and households to adapt. Over the longer term, structural shifts – such as the transition to a low-carbon economy – will also require substantial public investment and policy adjustment.
Governments need tools to help understand these trends and guide economic and fiscal policy, particularly over the longer-term. A growing number of countries are upgrading their suite of models to help do this. Examples include Australia, Canada, Denmark, Ireland, Netherlands, Norway, Switzerland and the United Kingdom (OECD, 2024[9]). The OECD’s EDISON tool provides a simple framework for understanding the fiscal implications of climate change. These modelling solutions range from simple excel tools that support responsive analysis to general equilibrium models for understanding complex economic interactions.
Models need to be developed with the right expertise, which means that economic forecasting teams should collaborate closely with other stakeholders, domestically and internationally. Statistics Norway, for example, worked with Norway’s Technical Committee for Climate in order to adapt its general equilibrium model for estimating the budget impact of climate policies. Denmark developed its GreenREFORM model with support from academia (Box 2.3). These collaborations ensure that new tools are developed with relevant expertise.
Governments also need to consider how forecasts of the economic and fiscal costs of climate change are presented, recognising the complexity and uncertainty of the underlying assumptions. The Intergenerational Report published by the Australian Treasury Department and the Fiscal Risks and Sustainability Report produced by the Office for Budget Responsibility in the United Kingdom are notable examples of published reports.
GreenREFORM is an advanced general equilibrium model for the Danish economy. It was developed starting in 2017 by the Danish Research Institute for Economic Analysis and Modelling, with support from the Ministry of Finance and other partners.
The model allows the government to analyse the impact of economic activity on environmental goals, and the impact of environmental policies on the economy. This can be used to guide economic and fiscal policy decisions to support the government’s environmental goals.
The main computable general equilibrium model links with component models for different sectors with high levels of greenhouse gas emissions, including for agriculture, land use, energy, transport and waste. These models can be solved on their own or simultaneously to understand how a new policy measure would impact on emissions and on the economy.
The model relies on disaggregated data on emissions and economic activity. The data covers 142 sectors in the economy and includes 27 different energy products (e.g. oil, gas and biomass). This data comes from three main sources:
Statistics Denmark national accounts data and the Environmental-Economic Accounts
Danish Energy Agency for data on energy industries, including on technological change.
Danish Transmission System Operator (Energinet) for data on energy generation and installations.
Development was a collaborative process, involving working groups for the different sub-models that could be integrated into the main model.
Source: OECD (2022[10]).
References
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