The energy sector in Israel is on the crossroad. Traditional energy sources are in process of replacement for natual gas (NG) and renewables in power generation, as well as gasification and electrification of industry and transport. Ultimately, the process is expected to lead to cleaner energy and better environment. However, concerns about energy reliability and security, intermittancy of renewables, and uncertainty about costs of energy transition and required infrustructure, challenge the transition. These developments offer policymakers opportunities to create a sustainable economy and make energy supplies resilient to catastrophic interruptions of supply.

The study aims to analyze the technical and economic impact of alternative paths for energy sector and GHG emission reduction in Israel. The proposed project involves a close cooperation with the Ministry of Energy and other relevant stakeholders. The policy evaluation will be based on a unique database and an up-to-date benchmark policy scenario. Ongoing dialogue with policymakers will be accompanied within a rigorous analytical framework that helps shaping the decision-making process. Policy questions that might be considered are: What would be the consequences of electrifying transportation and industry in varying rates? What would be the cost in terms of economic growth of transitioning to a green energy sector for the Israeli economy? Should a carbon tax be required, or would green standards be more effective in a small economy with regulated energy markets? What should be the optimal storage bundle to comply with the increase in intermittent energy sources? What would be the impact of switching the industry from fuels to Hydrogen? How will closing of domestic refineries impact the energy security and economic development?

Background: GTAP-AW (Palatnik, Raviv, Sirota, & Shechter, Under review) enhances the foundational GTAP model (Hertel, 1997) by incorporating desalinated and treated water and irrigated agriculture as distinct economic sectors within the global CGE framework. The desalinated and treated water sectors are conceptualized as intermediate factors of production alongside the freshwater industry, encompassing the extraction, collection, treatment, and distribution of water to end-users. To obtain this, the original water sector in GTAP was split into three sectors: desalination, treated water, and water distribution. In addition, the agricultural sector was disaggregated into rain-fed and irrigated agriculture. The three water-related and two agricultural sectors, along with energy, industry, and other economic sectors are characterized by their consumption of intermediate inputs and their reliance on the availability of capital, natural resources, labor, and land (Palatnik, Raviv, Sirota, & Shechter, Under review). Activity data: Building on the GTAP10A database (Aguiar, Chepeliev, Corong, McDougall, & van der Mensbrugghe, 2019) new alternative water sectors and irrigated vs rainfed agriculture sectors were calibrated to the year 2014 using available data on water consumption patterns by countries/regions (FAO, AQUASTAT Core Database, 2021; FAO, Aquastat, 2014) and the costs structure of newly introduced sectors (Plat, Lambry, Donadieu de Lavit, & de la Touanne, 2019; Baum, Palatnik, Kan, & Rapaport-Rom, 2016). Energy consumption approach: Within the GTAP-AW model, the energy consumption patterns of the water industries adhere to a specified general functional form. This approach ensures the representation of the relative energy intensities of these sectors within the established database