AIM/CGE modeling activity 2013
- Development of a CGE Model Coupled with Energy
End-use Technology Shinichiro Fujimori
National Institute for Environmental Studies
Presented at the international AIM workshop
December, 2013

Overview

AIM/CGE modeling activity in 2013 (1)Internationalactivities• AgMIP (Agricultural economic model inter-comparison project)(Hasegawa)• ADVANCE (one of the IAM intercomparison but not like EMF)
(Diego and Dai)
• SSP quantification processes• A set of socioeconomic scenarios for the next generationof climate change research

Domestic or
Asian activities• Asian low carbon society project (S-6)• Global model application• Individual country model applications; 10 countries(Namazu, Tu and Panida)• Next coming projects relevant to individual Asian countries’analysis (in preparation)• Indonesia• Thailand
Prof. Matsuoka, Masui-san and Takahashi-san organize andsupport CGE activities.

Overview

AIM/CGE modeling activity in 2013 (2)Originalactivities• Agriculture, land, bioenergy and climate change impacts research• Cooperating with GAEZ model (Takahashi and Tanaka)• Integrated assessment of mitigation, impact and adaptation(Hasegawa)• Resource assessment• Cooperating with variable renewable energy assessment(Diego and Dai)
• Biomass potential considering water (Hanasaki)

Modeldevelopment• Integrating agriculture, land, and biomass (mostly done in the lastyear)• Integrating energy end-use technology information and improve
its representation.
• Building platforms for multi model developers and applications
Prof. Matsuoka, Masui-san and Takahashi-san organize andsupport CGE activities.

Overview

Development of a CGE Model Coupled with Energy
End-use Technology• Introduction– Previous studies trials of Top-down (TD) and bottomup (BU) model• Methodology– Model structure– Scenarios• Results– GDP losses– How emissions are reduced• Discussions

BackgroundTwo types of models in IAMs
• Two types of models have been used for theassessment of climate change mitigation policy.
– TD model (such as AIM/CGE)• Adv; Entire economic goods and production factors are covered• Disadv; technological details are not described– BU model (such as AIM/Enduse)• Adv; technological details are represented• Disadv; macro economic feedback is outside of the model• There are several trials– Exchanging information each other• MESSAGE-MACRO, IMACRIM-R (WEM and CGE), CIMS

– Dealing with detailed technological representation partly• SGM (electricity and steel), EPPA (transport)

Objectives

Integrating bottom-up to top-down CGE
Develop fully coupled CGE model withdetailed energy end-use representation• Perfectly consistent solution (energy end-useand macro economy)• More realistic model for the CGE models.

• This study aims to show
– How the energy end-use is represented in thenewly developed model– What are the characteristics of the model

MethodModel structure (previous model)
Population

TFP

Fossil fuelextraction cost

Energy service
demandRenewableenergy costand availability

AIM/CGE [global]

Energydemand andsupply

Carbon andenergy price

GHGemissions

Land use• Electricity has
detailed resolution
combined with Logit
formulation• Land use andagriculture are dealt
with as a physicalvolume• Energy end-use isrepresented by CES
nested production
function or LES
consumptionfunction.

Method

How to determine energy end-use• Using technology informationfrom the AIM / Enduse
database• The technological selection ismade under CGE framework.
• Sector inputs several kinds ofenergy services– Cooling, warming, …
– Furnace, electric, machine …

• The operating share oftechnologies is determined
under logit function with cost of
the device investment andoperation cost.

Output of
sector j・・・

Energy service nLogit nest
Operation ofdevice l

Operation ofdevice l

EnergydemandEnergydemand・・・

Method

List of main end-use services and energy use

Definition of service

SectorTransport
Passenger gasoline car
Passenger diesel car
Passenger bus
Passenger electricity rail
Passenger domestic airIndustryBoiler as intermediate input
Heat as intermediate input
Machine as intermediate input
Other electric technology asintermediate input
Other non-electric technology asintermediate input

Passenger industrial air
Freight small truck
Freight large truck
Freight electricity rail
Freight domestic ship
Freight international ship
Freight domestic air
Pipeline
135Total
Electricity, Fuel-cell,
Gasoline, Natural gas,Coal, Oil, Natural gas, Biomass,
Energy use
Diesel, Coal, Jet fuel, Heavy Electricity, Heat
fuel oil, Crude oil, Oil

Services
Warming (Heating)Cooling
Hot water

Residents
Warming (Heating)Cooling
Hot water

Cooking

CookingLighting

Lighting

Office tools

Refrigerator
Television
Others

6Coal, Kerosene, LPG,
Natural gas, Heat,Geothermal, Electricity,Biomass, Oil (Kerosene)

8Coal, Kerosene, LPG, Naturalgas, Heat, Geothermal,Electricity, Solar thermal, Fuelcell, Biomass, Oil (Kerosene)• AIM/Enduse is the basis of the information• Total of main services: 32

Method

List of main end-use devices
Definition of device

Sector Transport
Passenger car
Hybric passenger car
Plug-in hybrid car
BusHybrid bus
Passenger rail
Aircraft for domestic flight (passenger)
Aircraft for international flight
Small-size truck
Small-size fuel-cell truck
Small-size hybrid truck
Large-size truck
Large-size fuel-cell truck
Large-size hybrid truck
Freight rail
Ship for domestic transport
Ship for international transport
Aircraft for domestic flight (freight)
Pipeline transport
Main
19
Detail76

IndustryServices
Residents
BoilerBoiler for space heating
Stove for space heating
Electrict boiler
Stove for space heating
Heat supply for space heating
Heat pump
Adsorption heat pump
Geothermal supply for space heating
Heat boiler
Heat supply for space heating
Air conditioner for warming
Furnace
Geothermal supply for space heating Air conditioner for cooling
Biomass furnace
Air conditioner for warming
Water heater
Electricc furnace
Heat pump for coolingElectric water heater
Heat furnace
Air conditioner for cooling
Heat pump type water heater
Motor
Water heater
Cooking equipment
Heat motor
Heat pump type water heater
Electric cooking equipment
Electrochemistry technology Cooking equipment
IH cooking heater
Other technology
Electric cooking equipment
Incandecent lamp
IH cooking heaterCompact fluorescent lamp
Incandecent lamp
Fluorescent lamp
Compact fluorescent lamp
Refrigerator
Fluorescent lamp
Television
Other electric equipment
Other electric equipment

1259

17120

Devices are divided into different levels and energy types:- Total of main devices: 65- Total of detail devices: 365

17110

Method

Scenario framework and assumptions

Mitigation
policyNo policy[BaU]
Mitigation[MIT]

Model type
Aggregated CES Detailed BU
informationand LES [AGG][BU]
AGG_BaU
BU_BaU
AGG_MITBU_MIT• Socioeconomic assumptions; middle of theroad (SSP2)

Results

35000

30000
Electric vehicle

30000

Plugin hybrid

25000

Electric vehicle

25000

Plugin hybrid

20000

5000

High efficiency

5000

High efficiency0

Low efficiency0

Low efficiency

BaU

Hybrid

2050

2045

2040

2035

2030

2025

2020

2015

2010

High

2005

2050

Medium

2045

10000

2040

Medium

2035

10000

2030

15000

2025

High

2020

15000

2015

Hybrid

2010

20000

2005

Passenger-km (bil. person km/year)

Example of the end-use technology selection

Mitigation

Technology breakdown of global passenger car service• This is just an example to show the endogenously
determined within the CGE model in conjunction with
BU information.

Results

Emissions and energy supply

GHG emissions••••

Primary energy supply

AGG model is slightly higher emissions in BaU
MIT scenarios are same
Primary energy supply is not so quite different in BaU
Those of mitigation scenarios are different “oil”.
– The transport sector is one of the key sectors. AGG model is relatively hard toreduce the oil consumptions

Results

Policy cost; carbon price and GDP losses

Carbon price

GDP losses due to the climate
mitigation• Carbon price is higher in AGG– It would be due to the BaU emissions difference and mitigation
possibility but hard to identify• GDP losses are also high in AGG

Results

CO2 emissions decomposition analysis

AGG model

BU model• Activity level change is a small factor in all sectors of both models• AGG model has less emission reduction in transport and household– The carbon factor reduction in transport is small in BU– The energy intensity improvement and carbon factor reduction in household
are small in AGG• Biofuel and electric vehicle availability• The typical Household demand function is not so stylized for the energy assessment

Results

Energy price elasticity and AEEI-

Energy price elasticity
Energy intensitychange=Autonomous energy efficiency improvement
Price effect+Autonomous efficiency
improvement• Regression analysis of the BU model energy end-use response• Both are heterogeneous across regions and sectors whereas single
parameter is typically used in previous work.
• Some are an outside range of previous work’s assumptions particularly inprice elasticity.

Discussions

GDP losses and how to account the energy
device expenditure
Indicators
Model type
Additional energy device
cost in householdWorldOECD
AdditionalAsia
expenditure for Reforming Economies
energy device Middle East and Africa
Latin America

Expenditure
for energy
goodsExpenditure
for energy
devices
BaU•
••
•
•

GDP

Carbontax

BUAGG

Household consumption
BUAGG

w/w/o-w/w/o-

2.8
1.9
4.0
7.0
2.0
1.7

3.4
2.9
4.3
7.8
2.3
2.3

3.5
2.9
4.1
12.5
2.7
1.5

3.9
1.7
5.3
11.7
8.3
2.8

4.8
2.9
5.7
12.7
8.7
3.5

4.8
3.3
5.8
17.0
5.4
2.7

MIT

Additional expenditure for energy device never contributes welfare so it would beexcluded?
Global losses in BU become closer to AGG.
Regional differences are heterogeneous.
BU model enables to distinguish the household additional expenditure for energy
device and to show how the way of accounting matter with the macroeconomicindicators.
But it does not mean that if the additional energy device expenditure in household
is excluded, the macroeconomic losses are supposed to be always same as AGG
model.

Discussions

Sectoral energy and emission responses to mitigation• The energy demand differences would be dueto the difference of the function form.
• The aggregated model relies on the base year
calibration but BU model is free from that.
– The electric vehicle is never calibrated but
expected in the future. BU model can deal with.
– One of the advantages of the BU model

ConclusionsFindings• We developed a CGE model coupled with detailed energy
end-use technology representation.
• Key results– Macro level impressions of the results are not so quite different.
– Macroeconomic loss caused by mitigation is slightly less thanprevious models but how we account the household
expenditure makes different results and interpretations.
– The energy price elasticity and AEEI derived from the results areheterogeneous across regions and sectors.
– The way how transport and household sectors reduce CO2
emissions are different and the proposed model showed highenergy efficiency improvement and carbon factor reduction inparticularly household sector• The application of this model to individual Asian countries
is desirable.

Conclusions

Limitations• Parameters incorporated in the Logit functionis arbitrarily assumed. It strongly requires
behavioral studies or investigation.
• Energy service demand determination is alsoquite simplified.
• Energy end-use cost is actually part of theenergy cost and infrastructure would
substantially affect to the energy choices.