Top-Down Economic Models Project baseline carbon emissions over time for a country or group of countries Find the least-cost way to meet any particular emissions constraint Provide a measure of the carbon price, in dollars per metric ton Provide some measure of the overall cost of meeting an emissions target
Key SGM Characteristics 2 Computable General Equilibrium 2 12 Global Regions (Developed in International Collaborations) 2 Multiple Greenhouse Gases 2 Internally Generated Demographics 2 Vintaged Capital Stocks 2 Explicit Energy Technology 2 Land Resource Constraints
Computable General Equilibrium 2 Based on Economic Principles. 2 All economic activities are included in some sector of the model. 2 Market equilibrium -- ALL markets must clear simultaneously. 2 Maximization Behavior -- consumers, utility; producers, net worth.
SGM Regions u Annex I United States Canada Western Europe Japan Australia Former Soviet Union Eastern Europe u Non Annex I China India Middle East Mexico South Korea Rest of World
Multiple Greenhouse Gases 2 CO 2 2 CH 4 2 CO 2 N 2 O 2 NOx 2 SOx 2 NMHC
Internal Demographics 2 Age structure & gender of the population is developed internally using: fertility rates survival rates net migration rates 2 Labor force participation rates can be age & gender specific.
Energy Focus 2 8 Energy Sectors 2 Resources and Reserves of Energy Resources 2 Vintaged Energy Using Technologies
SGM Is Part of GCAM 2 SGM is part of the Global Change Assessment Modeling (GCAM) System, an integrated assessment model computes concentrations of greenhouse bases such as CO 2, can compute T and sea level rise.
Production Decisions 2 Production occurs out of existing capacity and its vintage limited by previous investments, & then current technologies 2 Retirement of old capacity occurs when Cannot cover operating expenses Old age -- fixed life, or Policy -- forced retirement
Production Functions u Technical coefficients control change in input-output ratios over time. u Energy coefficient is similar to AEEI (Autonomous Energy Efficiency Improvement). ),,,;,,,( MtEtLtKtttttt aaaaMELKfQ
New Capacity 2 Investment is based on expected profitability. available technology price expectations, & policy expectations 2 Price & Policy Expectations can be either forward or backward looking.
Investment 2 Capital market balances supply and demand of loanable funds. 2 Investment resources distributed among investments with positive expected net profitability no resources flow to expected losers the higher the expected rate of return, the greater the share of the investment pool
Energy Production 2 Energy production out of reserves. 2 Additions to reserves from the resource base. additions depend on expected profitability resource availability.
Energy Technology 2 Hierarchical model. sectors, sub-sectors, & technologies. 2 Explicit energy technologies can be introduced into the model. e.g. natural gas combined cycle turbines for power generation.
Issues the SGM Can Address 2 Assessing impacts of greenhouse gas emissions mitigation policies on GDP, consumption and energy. 2 Value of emissions rights trading. 2 Value of “when” flexibility. 2 Relative costs and benefits to regions of the world of alternative protocol formulations.
SGM Strengths 2 Built specifically for climate policy analysis. 2 Multiple greenhouse gases. Part of an Integrated Assessment model -- e.g. can compute CO 2 concentrations or T. 2 General equilibrium -- all markets clear. 2 Detailed energy supply sector. 2 Can be run in alternative foresight modes. 2 Internal demographics. 2 International Collaborations.
SGM Limitations 2 Not a business cycle model -- does not estimate inflation or unemployment policy impacts. 2 Limited energy end-use detail. 2 Provides no sub-national disaggregation for the United States.
SGM Data Requirements Original DataDerived Data for SGM 1990 Input-Output Table 1990 Energy Balances Hybrid Input-Output Table Annual Investment Data by SectorCapital Stocks by Sector Data on Fossil Fuel ResourcesResource Grades Electricity Supply: generation, installed capacity, energy consumption, capital costs, operating costs Input-output representation of electricity generation by fuel National Income Accountstax rates, savings rates
international trade Bottom-Up Energy Technology Ecosystem Impacts Top-Down Economic Model (integration tool) Region ARegion B Climate Scenarios Model Integration