CGE Modeling for Regulatory Analysis

The EPA conducts benefit-cost analysis (BCA) for all economically significant rulemakings (those with costs and/or benefits of at least $100 million in a single year) and for particularly novel rulemakings. These analyses quantify the expected social benefits and costs of alternative regulatory options relative to a baseline that represents conditions expected to occur absent the regulation. In addition, the EPA may evaluate the economic impacts of a rulemaking - how the costs and benefits of regulation are distributed across households, sectors, and regions.

An important tool for evaluating the benefits, costs, and economic impacts is a computable general equilibrium (CGE) model. CGE models provide aggregated representations of an entire economy in equilibrium in the baseline and under a regulatory or policy scenario. They are designed to capture substitution possibilities between production, consumption, and trade; interactions between economic sectors; and interactions between a policy shock and pre-existing distortions, such as taxes. Unlike many other modeling tools that the EPA uses, CGE models provide insights into the effects of regulation that occur outside of the directly regulated sector(s).

In 2015, the EPA formed a Science Advisory Board (SAB) panel to explore the use of general equilibrium approaches, and more specifically CGE models, to prospectively evaluate the costs, benefits, and economic impacts of environmental regulation. The EPA authored several  white papers and memos to inform this SAB process. The SAB's final report affirmed the value of CGE models in capturing important interactions between affected markets when there are both significant cross-price relationships and distortions in those markets. Furthermore, the SAB identified the value of CGE models as a complement to the detailed sector-level cost analysis that the EPA typically conducts for its rulemakings.

In response to the SAB recommendations, the EPA’s National Center for Environmental Economics (NCEE) Division was tasked with developing the Agency’s economy-wide modeling capabilities for regulatory analysis. One of the first capacity-building steps was to develop a new CGE model of the United States economy, called SAGE (a recursive acronym for SAGE is an Applied General Equilibrium model).

The SAGE CGE Model

SAGE is a CGE model of the United States economy developed to aid in the analysis of environmental regulations and policies. It is an intertemporal model, resolved at the sub-national level by United States Census region. Each region in the model has five representative  households reflective of national income quintiles and 23 representative firms, with greater resolution in the manufacturing and energy sectors that are often subject to environmental regulations. SAGE builds on the advice of the SAB’s 2017 report, best practices in the economics literature, and EPA's  Guidelines for Preparing Economic Analyses. Users can download the SAGE model and accompanying model documentation for the latest version here: 

• SAGE Model Documentation version 3.0.0 
• SAGE version 3.0.0 (zip)  (Oct. 05, 2026)

The model is solved using the General Algebraic Modeling System (GAMS) and the PATH solver. The model’s build stream, a set of programs used to construct the required data inputs for SAGE, is written in R and GAMS. Version 3.0.0 relies on open-source social accounting data from the Wisconsin National Data Consortium (WiNDC) to facilitate public access and transparency.  

View prior versions of the SAGE model and its documentation.

Peer Review

The EPA's Science Advisory Board completed a peer review of the SAGE model in August 2020. SAGE versions >2.0.0 incorporate improvements in response to the SAB recommendations, including updates to address those recommendations that the SAB advised EPA to incorporate before using the model in regulatory analysis (denoted as Tier 1 recommendations). These improvements include refining the calibration of government expenditures and deficits and the foreign trade deficit; allowing for more flexibility in the consumer demand system; and representing the United States as a large open economy. Several of the SAB's medium- and long-run recommendations have also been incorporated into the model.  View EPA’s response to the SAB recommendations. 

An additional peer review of version 3.0 in 2026 focused on the technical approach, merits, and potential concerns of replacing proprietary state-level dataset previously used, with the open-source WiNDC dataset as a basis for the social accounting matrix in the SAGE model. An NCEE-authored memo describes the differences between the two data sources in the SAGE application to inform the peer review. Three independent reviews conducted by external experts were all supportive of this transition.

Rulemaking Applications Using the SAGE Model

The SAGE model has been used in regulatory analysis for EPA rulemakings. Model code, input files, and output files for these applications are available via the links in the table below.

NCEE Working Papers Using the SAGE Model

For published versions of these working papers, please visit the Journal Articles and Book Chapters by NCEE Staff webpage.