Modeling macroeconomic dynamics of the Cambodian energy transition - 2050 Facility

Aware of the potential of long-term scenario analysis to contribute to sectoral dialogue and interministerial planning regarding the Royal Government of Cambodia's climate commitments, the Ministry of Economy and Finance (MEF) requested support from AFD to develop energy transition modeling tools to identify both the opportunities and the risks it may generate. Having set the goal of achieving carbon neutrality by 2050, the government wishes to have decision-making tools for energy and climate strategy, as well as public policies.

To address this need, AFD set up a two-phase technical assistance program through the 2050 Facility. The first phase (2020-2023), focused on the energy sector, was implemented by IED Group and Artelys, with support from IDDRI's Deep Decarbonization Pathways initiative acting as scientific advisor. The second phase (2024-2027), which incorporates an analysis of the macroeconomic externalities of the transition, once again mobilized IED as well as AFD's Economic Diagnostics Department (ECO).

Energy sector modeling (Phase 1):

• Development of CEPIA (Climate and Energy Prospective Impact Assessment), a multisectoral model aggregating supply and demand data for all types of energy and for at least 10 end-use sectors, capable of identifying future investment needs and calculating long-term carbon trajectory scenarios;
• Training for ministries and public operators participating in the working groups on the use, interpretation, and strategic application of the model.

Macroeconomic dynamics of the green transition (Phase 2):

• Production of the 2022-2023 Energy Balance Table (EBT), an accounting table tracking energy flows in Cambodia (production, transformation, import/export, and consumption), development of a web-based data collection tool to streamline the production of future EBTs, and training on how to use the tool;
• Updating CEPIA and transition scenarios with the most recent data;
• Development and ministry training for ESTEEM (Exposure to Structural Transition in an Ecological-Economic Model), a macroeconomic model for assessing transition risks (external, fiscal, and socioeconomic) in its static version, capable of integrating the energy trajectories produced by CEPIA in its dynamic version, thereby providing an evolving view of these risks to support strategic decisions and long-term public policies.

The project is funded by AFD through two 2050 Facility grant phases totaling €800,000, with the first at €300,000 and the second at €500,000.

• 2 robust and user-friendly modeling tools for energy and climate trajectories, and their economic implications through 2050;
• 4 long-term energy transition scenarios for Cambodia;
• 1 Cambodian energy balance table and 1 sustainable data collection tool;
• Capacity building for beneficiary ministries and public operators in using energy and economic models to inform public policy development.