The critical act of cutting greenhouse gas emissions remains a huge challenge for both countries and businesses in the coming decades. To increase our analytical capacity within the climate and energy space, Copenhagen Economics collaborated with global management consultancy Bain & Co. to develop “Intersect”, a state-of-the-art climate economic model.   

The Intersect Model

Intersect is Copenhagen Economics’ global climate economic model. It is a so-called Computable General Equilibrium (CGE) model, which means that it describes the economic interactions between consumers, firms, and governments under different abatement scenarios. Hence, the model provides a comprehensive view of the economy and its linkages while looking at the entire value chain. This is increasingly relevant as the green transition has significant implications for value chains across many countries.  

The model has been designed to tackle complex questions, such as:

  • How does carbon price change as we move towards more ambitious climate targets?  
  • Which sectors should be included in the ETS mechanism?  
  • What do the future production, trade, and use-cases of hydrogen products look like?  
  • Where are the key transition risks to our portfolio?  

Given different emission target scenarios, the model simulates future prices and volumes for key commodities and markets, uptake, and costs of new technologies to give the marginal cost of further abatements. This generates a range of insights on how the optimal decarbonisation strategy and timing varies by country and sector,  

In the baseline version, the model has the following specifications: 

  • Global coverage with disaggregation into 18 different regions. Trade patterns are based on the GTAP database.  
  • Description of the production of a high and growing number of different goods and services (currently more than 30) including electricity, transportation, heavy industries and extraction, construction, and hydrogen.   
  • Different technology options to reduce emissions, for example through electrification (such as electrical vehicles, battery technology, etc.) or hydrogen-based paths (such as green steel and hydrogen fuel cell trucks) or carbon capture.  
  • Learning curves on new technologies means that early climate action lowers the cost of future abatements.  
  • Global and regional supply of scarce resources of fossil fuels (oil, gas, and coal) and non-ferrous metals.  
  • Calibrated to meet the regional abatement paths towards 2050 as given by different International Energy Agency (IEA) scenarios such as STEPS, APS, and Net Zero.  

The model is flexible and can be customised to include a more granular view of different industries, countries, technological outlooks, CO2 targets, and policy approaches, etc. The underlying assumptions and mechanics are continually updated and improved.

To read some of our publications relevant to our Climate Energy & Natural Resources service area, click on the link below.

Learn more about the Intersect model and how it can answer the question of how to make the green transition cost-effective in this podcast episode.