Distributional Impacts of Energy and Climate Policy Using Spatial Microsimulation Modelling

Spatial Microsimulation is a tool to reweigh nationally representative microdata such that it is representative at the small area level. This information can then be combined other data, such as economic, energy and environmental data, to provide new insight into the distributional impact of policy interventions and environmental processes. In particular, the spatial distribution of these impacts can be captured. This presentation will provide an overview of work in this area, focussing on the Spatial Microsimulation of the Irish Local Economy (SMILE) model. The statistical matching algorithm developed to reweigh EU SILC data will be outlined. This is combined with a tax-benefit model. A number of applications of this framework will be presented. First, the spatial incidence of Irish tax-benefit policy will be presented. Second, the incidence of financing renewable energy-related industrial development will be presented. Wave energy device deployment in Ireland has been promoted on grounds of regional industrial development. We calculate the net incidence of both subsidy costs and added employment impacts, finding that while between-region inequality falls, total inequality grows by a substantially greater amount. Further work will involve development of this modelling framework to consider the distributional impact of climate events. This will involve development to accommodate other EU regions and integration with climate modelling work at the Potsdam Institute of Climate Impact Research.