The survey reviews international literature in this field, emphasizing the suitability of numerical macro models and how they can be improved for this purpose. Simpler tools are also considered.

As a basis for the assessments, seven criteria that the models should meet are defined. They should:

(a) include emissions

(b) be sufficiently detailed regarding emission sources and responses to climate policy

(c) model key climate policy instruments

(d) reflect short-term transition effects

(e) calculate cost indicators

(f) provide consistent calculations in the short and long term

(g) handle all model applications

Assessments are then made regarding the suitability of two Norwegian numerical macro models developed by Statistics Norway (SSB): SNOW, an equilibrium model, and KVARTS, a macroeconometric model, for analysing the cost and emission effects of climate policy. The potential adaptation of these models to the suitability criteria is considered. A third tool, KAJA, is briefly mentioned.

SNOW is specifically developed for climate analysis, but the current version fails to meet two criteria. It does not reflect short-term transition effects, and it is challenging to contribute to consistent short- and long-term effects. The literature suggests several solutions to incorporate transition effects, either by modelling inertia in capital and labour adjustments to ensure consistency in short- and long-term adjustments, or through more ad hoc-based solutions.

KVARTS has multiple adjustment mechanisms and consistent short- and long-term solutions. While recent updates have included relevant emissions, the model is relatively aggregated in terms of sources and responses and has other applications that may be hindered if it becomes too large. Some detailed expansions have been considered. It currently includes taxes and subsidies but at an aggregate level. It is possible to detail this further. Lastly, it lacks a consistent measure of economic welfare costs.

The tool Kaja consists of price elasticities and emission coefficients used by the Ministry of Finance for long-term emission analyses of tax changes. KAJA can be supplemented with short-term characteristics and developed in other ways.

Based on the discussions, some possible development paths for SSB's SNOW and KVARTS models, as well as KAJA, are outlined. KVARTS will be developed further for climate policy analyses but must also consider other analysis purposes. The SNOW model will remain the most suitable for climate policy studies, but it lacks short-term characteristics. There is insufficient knowledge to recommend whether and how short-term characteristics should be integrated into SNOW. An alternative is additional calculations or post-calculations using other tools, such as those based on KAJA. Further testing is recommended, and some limited projects are proposed as initial steps.