1. Federal Planning Bureau Economic analyses and forecasts METHODOLOGY OF EMISSIONS PROJECTIONS FOR BELGIUM (Third national communication, April 2002) METHODOLOGY OF EMISSIONS PROJECTIONS FOR BELGIUM (Third national communication, April 2002)

2. Federal Planning Bureau Economic analyses and forecasts USE OF MODELS FOR MEDIUM AND LONG TERM PROJECTIONS -Medium term projections: combination of a macro- sectoral econometric model (HERMES) and of a technico-economic simulation model (EPM) - Long term projections: use of a long term multi-period energy technology optimisation model (MARKAL) and of an applied general equilibrium model (GEM-E3) Projections computed for the periods 2000-2010 (medium term instruments) and 2010-2020 (long term instruments - scenario with measures - scenario with additional measures -..NO scenario wthout measures

3. Federal Planning Bureau Economic analyses and forecasts Medium term projections Macroeconomic level National macro-sectoral model HERMES Energy global balances for BELGIUM Energy related GHG emissions Total GHG Emissions Other GHG Emissions (Industrial processes, agriculture, waste…)

4. Federal Planning Bureau Economic analyses and forecasts Main characteristics of the macroeconomic model Main characteristics of the macroeconomic model Class of macro-econometric models based on time series Keynesian mechanisms; behaviour of agents based on microeconomic foundations ; Top-down approach (but: macro totals = sum of sectoral figures) Geographical coverage: Belgium Scale –4500 equations, of which 450 regressions (ECM) –600 exogeneous variables –16 Branches –4 Production factors –15 Consumption categories (+ 3 subdivisions) –5 institutional sectors –8 Energy Products

5. Federal Planning Bureau Economic analyses and forecasts Energy products and GHG gases I. Energy products Energy products Solid fuels: coal, coke Liquid fuels: crude oil, motor spirit, diesel oil, residual fuel oil, naphtas and kerosenes Gases: natural gas, coke-oven gas,blas-furnace gas Electricity Renewables Computation of energy consumption per branch and agent (households, firms, public administrations) Output: Coherent energy balances based on Eurostat methodology; calculation for each year of the projection

6. Federal Planning Bureau Economic analyses and forecasts Energy products and GHG gases II. GHG gases 1.Energy Fuel Combustion Energy IndustriesCO 2, CH 4, N 2 O IndustryCO 2, CH 4, N 2 O TransportCO 2, CH 4, N 2 O Other SectorsCO 2, CH 4, N 2 O Fugitive EmissionsCH 4 2. Industrial Processes IndustryCO 2, CH 4, N 2 O,HFC, SF 6 EnergyCO 2 3. AgricultureCH 4, N 2 O 4. WasteCO 2, CH 4, N 2 O TotalCO 2, CH 4, N 2 O,HFC, SF 6

7. Federal Planning Bureau Economic analyses and forecasts Outputs of the macroeconomic model Outputs of the macroeconomic model GDP and components (consumption, investments, external trade,…) Activity per branch (production, value added, investments) Labour demand per category Costs and prices Sectoral accounts (households, firms, rest of the world,…) Detailed public finances Energy balances, based on Eurostat methodology GHG emissions: given according to the GHG inventory classification, but…

8. Federal Planning Bureau Economic analyses and forecasts Outputs of the macroeconomic model … For energy related CO2 emissions: differences between our starting points and the latest available inventory due to methodological problems; For other GHG emissions: same starting points, in theory

9. Federal Planning Bureau Economic analyses and forecasts Medium term projections Microeconomic level Use of EPM model: Energy/ Emission Projection Model (developed by ECONOTEC) Bottom up simulation model (and multi-pollutant) covering a time horizon of 10-15 years Detailed description of: Industry: 90 activities; Residential sector: 14 kinds of housings; Tertiary sector: 30 sub-sectors for energy consumption Transportation Calculation of emission reduction cost curves

10. Federal Planning Bureau Economic analyses and forecasts Medium term projections Combination of Macro and Micro approaches 1.Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…)

11. Federal Planning Bureau Economic analyses and forecasts Medium term projections Combination of Macro and Micro approaches 1.Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) 2.Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,…

12. Federal Planning Bureau Economic analyses and forecasts Medium term projections Combination of Macro and Micro approaches 1.Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) 2.Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,… 3.Simulation of the macroeconomic level with the new information

13. Federal Planning Bureau Economic analyses and forecasts Medium term projections Combination of Macro and Micro approaches 1.Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) 2.Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,… 3.Simulation of the macroeconomic level with the new information But: -BAU scenarios not necessarily the same in the two levels - Identification of energy savings potentials can be controversial

14. Federal Planning Bureau Economic analyses and forecasts Scenarios presented: I. Baseline scenario= « With measures » scenario This scenario only takes into account firmly decided measures - GDP average increase: 2.4% during the period 2001-2012 - moderate increase of energy needs (evolution of energy needs in industry rather low) - Decrease of energy consumption per euro of GDP (chart 1) - However: increase (even if limited) of CO 2 emissions: the Kyoto requirement is not achieved (chart 2) energy consumption per euro of GDP CO 2 emissions

15. Federal Planning Bureau Economic analyses and forecasts Scenarios presented: II. « With additional measures » scenario A. Introduction of a CO 2 tax Introduction of a CO 2 tax: 1.3 /ton of CO 2 in t; 11.5 /ton of CO 2 in t+10 Simultaneous reduction of other taxes (social security contributions) No negative effect on GDP growth slight positive effect for employment significant impact on energy demand and on CO 2 emissions… …however not sufficient for Kyoto targets

16. Federal Planning Bureau Economic analyses and forecasts Scenarios presented: II. « With additional measures » scenario B. Effects of non-fiscal measures Micro economic evaluation of energy savings potential (use of a specific model:EPM) Incorporation of microeconomic information into the macro model Positive effects on GDP growth; employment gains decrease of energy consumptions: -4.4 % in t+10 important impact on CO 2 emissions (7.5 Million of tons avoided)

17. Federal Planning Bureau Economic analyses and forecasts Remaining problems Sensitivity analysis: choice of hypotheses!! Data quality Combination of the models …

18. Federal Planning Bureau Economic analyses and forecasts END

19. Federal Planning Bureau Economic analyses and forecasts Branches considered branches Agriculture Energy Manufacturing industries –intermediary goods –equipment goods –consumption goods Construction Transports and communic. Trade, lodging and catering Credit and insurances Health care Other market services General government services Other non market services Further disaggregation for the next Communication: Transports and communications disaggregated in Railroad transport Urban and road transport Water and air transport Auxiliary transport activities and communications

20. Federal Planning Bureau Economic analyses and forecasts Inputs/ outputs of the model Inputs/ outputs of the model Inputs International environment –Evolution of external markets –Prices of commodities (of which energy products) –Interest rates –Exchange rates National policies –Fiscal policy –Social policy –Others (labour market,…) Others (demography, average temperature, structure of electricity production,…)