Using applied general equilibrium techniques,
it is possible to compute alternative equilibria for different policy regimes
and to assess impacts of the changes. We have used these techniques to verify
economy-wide effects of SO2 emission reduction in Poland according
to international sulfur agreement. Simulation results suggest that future
emission reduction may have a positive effect on Polish economic indicators. We
should not be afraid of a slump in emitting sectors. Some sectors may increase
their SO2 emission and abate it afterwards, rather than decrease
their emission at once. The poor households may even gain because their welfare
effect will be positive.
Keywords: Computable general equilibrium model;
External shocks; International environmental agreement