# Presentation: 154714

## Brief Overview of theSecond Generation Model

- Presentation to
- U.S. EPA Science Advisory Board
- SAB Second Generation Model (SGM) Advisory Panel

- Dr. Michael Shelby
- Office of Atmospheric Programs
- December 2, 2004

## Overview

- Rationale for Advisory
- Background on the SGM
- Sample Outputs

## Rationale For Advisory

- The SGM is one of EPA's primary tools for analyses of climate change policies
- Used extensively by the the U.S. government (i.e., CEA) in 1998 and 1999 to analyze the impact of the Kyoto Protocol
- Used in modeling forums such as the Stanford EMF to conduct analysis of climate policies
- Never been formally peer reviewed
- In keeping with Agency and Administration policies (e.g., EPA peer review policies), OAP would like the SGM to undergo a formal peer review

## Rationale For Advisory

- Expect iterative process of consultation(s) and peer review to be the best and most useful mechanism for examining the model
- SGM is still evolving and developing.  We hope that SAB will offer insights into the next best steps for model development efforts

## SGM Basics

- Computable General Equilibrium model designed for analysis of global change issues, including:
- projecting baseline greenhouse gas emissions
- determining the least-cost pathways for emission mitigation
- providing a measure of the carbon-equivalent price
- providing a measure of the overall cost
- analyzing relative impacts on different sectors and/or regions
- Developed by Jae Edmonds, Hugh Pitcher, Ron Sands and others at the Joint Global Change Research Institute of Pacific Northwest National Laboratory and the University of Maryland

## Key Features

**14** regions of the world
- USA, Canada, Mexico, Western Europe, Eastern Europe, former Soviet Union, China, India, Brazil, Japan, South Korea, Australia/New Zealand, Middle East, Rest of World
- Can be operated in single region mode
- Many regional models are developed in collaboration with in-country researchers
**5** year time steps from 1990 to 2050
**7** Greenhouse Gases
- CO2, CH4, N2O, HFCs, HFC-23, PFCs, SF6

## SGM Structure

- Factor Markets:

- Land

- Labor

- Capital

- Product Markets:

- Energy

- Industry

- Transportation

- Agriculture

- ETE

- Final Demand Sectors:

- Government

- Households

- Investments

- Production Sectors:

- Energy

- Industry

- Transportation

- Agriculture

- ETE

- Rest of the World

- Imports

- Exports

- Final Goods

- Intermediate Goods

- Factor  Services

- Supply of Land, Labor, & Capital

*Kim, S.H., 1995, Stabilization of carbon emissions: a viable option for the Republic of South Korea. MIT, Cambridge, MA.*

## SGM Production Sectors

- (includes recent additions of renewable energy and advanced fossil technologies)

## Mapping Emissions from Production Sectors

*Fawcett, A., and R. Sands, Non-CO2 Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Production Functions

- All goods are produced with either a non-nested Constant-Elasticity-of-Substitution (CES) production function
- new investment within the electricity sector (e.g., new coal, gas, oil, etc.) is allocated based on a logit sharing mechanism
- or
- Leontief production function
- For production functions with elasticities of substitution < 0.05
- Oil refining
- electricity generation from its various energy sources

## Technical Change

- Set of parameters that can be used to simulate technical change over time for production sectors
- Separate parameters are available for each input to each production process (and each vintage)
- Parameters that determine energy, land, labor, and capital productivity, i.e., non-neutral technical change
- Labor productivity parameters are the primary determinant of economic growth
- Both energy efficiency and labor productivity parameters can be altered to construct reference scenarios

## Other Notable Features

- Capital stock is industry-specific and is segmented into five-year vintages by sector
- Elasticity of substitution between inputs is greater for new capital than for old capital vintages
- “Putty-semi putty” and “putty-clay”
- Economic input-output tables combine with energy balance tables to form hybrid input-output tables
- Energy balance is maintained throughout the model time horizon
- IEA tables used for energy balance data

## Sample Outputs: Global Analysis (1)

*Fawcett, A., and R. Sands, Non-CO2 Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

**Global Reference Case Emissions **

## Sample Outputs: Global Analysis (2)

- (Stabilize Forcing at 4.5 Wm-2 Relative to Pre-industrial Times by 2150)

**Global Emissions Under CO****2****-Only Policy Case**

*Fawcett, A., and R. Sands, Non-CO**2** Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Sample Outputs: Global Analysis (3)

**Global Emissions Under Multi-Gas Policy Case**

*Fawcett, A., and R. Sands, Non-CO**2** Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Sample Outputs: Global Analysis (4)

**Global Cumulative Emissions Reductions **
***(2013 – 2050 with Hotelling price and 3% interest rate***)

*Fawcett, A., and R. Sands, Non-CO**2** Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Sample Outputs: U.S. Analysis (1)

**U.S. Baseline Emissions from Energy Combustion/Non-CO****2  ****Greenhouse Gases **

*Fawcett, A., and R. Sands, Non-CO**2 **Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Sample Outputs: U.S. Analysis (2)

**U.S. Reference Electricity Generation**

*Fawcett, A., and R. Sands, Non-CO**2** Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*

## Sample Outputs: U.S. Analysis (3)

**U.S. Cumulative Emissions Reductions Over 50 years at Alternative Constant Carbon Prices**

*Fawcett, A., and R. Sands, Non-CO**2** Greenhouse Gases in the Second Generation Model, submitted to The Energy Journal, September ‘04*