Deployment of new clean technologies in developing countries in a CGE framework: fostering investments in clean and renewable energy

Technological advancements are one of the major drivers of economic growth. Diffusion of new technologies provide the initial impulse for new and alternative production processes that will constitute additional engines for development. In addition, with adequate incentives these new technologies could grow in size and become an important sector within an economy. This is the case of clean and renewable energies which are growing fast not only in the developed world, but also on developing countries. Modeling these kind of processes have proven to be quite a challenge, in particular in a general equilibrium framework. Furthermore, given that computable general equilibrium (CGE) models use data from social accounting matrices (SAM) providing information for the calibration year, it is very difficult to introduce a new sector or technology in SAM where initially it was incipient. This paper describes a methodology to integrate new sectors in a recursive dynamic CGE by modifying the initial SAM and including a new type of investment which cumulates in time allowing the new sector to become mature and take part in the future economy development.