Models for projecting the impacts of ETR

The chapter describes the main modelling tools, E3ME and GINFORS, which were used to provide a quantitative analysis of the effects of ETR, and sets out the models' underlying assumptions and simplifications that play a large role in determining the magnitude and direction of the models' results. The chapter also identifies areas in which the models' results are likely to differ, particularly with regard to the intended impacts of ETR, and considers how the treatment of revenues from environmental taxes and charges affects the results of modelling ETRs. The detailed application of the models to ETR is then described, outlining the lines of causality between such variables as energy prices, energy demand, output of different industrial sectors, real incomes, and household expenditure, without quantifying the results, but identifying the likely direction of the different impacts and potential indirect effects.