A Integrated Environmental and Economic
Modeling in Korea : Based on AIM/CGE model

Focusing on…
9 difference between AIM CGE of Japan and Korea
in Modeling - Method, Data, and Structure
9 Future work - Dynamics and Policy Application

Kang, Sang In, Kim, Jae Joon, Tae Yong Jung
Korea Environment Institution
The 12th AIM International Workshop
19-21, February 2007, Conference Room in Climate Change Research Hall, NIES

Intro - Background¾ Designed for the evaluation of environmental policy
impacts on the national economy under the given
environmental regulation scheme challenging global
environmental issues
Why we construct the integrated National CGE model?
 Widely accepted as a quantitative tool for integrated environmental
impact analysis
 An effective tool deal with price linkage system through feedback
mechanism Can apply the impact of various environmental policy and regulation
at National level

Intro - Background
What’s new in Korea model

items

AIM/material CGE

Korean version

Accounting in related toEnvironment

Environmental capital productWaste management service

Environmental investment
Industrial waste management
Material flow

Material Flow of emission

CO2: material input
Waste : material input

Co2 : depend on fuel use
Waste : depend on production
level

Modeling technique

GAMS/MPSGEGAMS algebraic subsystems: to solve the infeasibility

nextModeling - method, data, and structure
Simple Social Accounting Matrix
ProducermarketfactorprivatepublicCapital(inv)

Foreign

Producer
(40)

Sale

Market(40)

ConsumConsumeinvestExportFactor(labor,Capital)
incomeTax(indirect)

Tax onimportIncomeTax(direct)

Capital(saving)

Saving p

ForeignTotal

demandFactorDemandPrivate
Publictotal

Revenue
Saving GImport
Purchase

SupplySavingclosureFactor supply

Industrial waste management service

expenditure

Investment

outflow
inflow

Environmental investment

Modeling - waste flow structure
RecycleSelfmanagement
Fin. disposal

Industrial wastes(19 types)

Int. man.
Productionactivity

Ind. wasteman. sector

Dir. reuse
Dir. disposal

Municipal wastes(8 types)
Int. man.
Mun. wasteman. sector
Household

Municipal wastes(8 types)

RecycleFin.
disposal

RecycleDir. reuse
Dir. disposal

Fin.
disposalAIM/Material CGE Production structurecommodity 1…

commodity m

σ=0
σ：elasticity of substituteactivity

Energy share isdefined as thediffusion of stock

σ=0aggregatedintermediate input

energyvalue added

input for pollution
management

σ=1

σ=0

σ=0
σ=0
input 1…

input ncapitalfuel 1

σ=0

fuel eCO2labor…

pollution pcontract
treatment

emissionspollution 1
σ=∞electricity…CO2
virginmaterialselfmanagement

reusedmaterial

σ=0
Reused material share isdefined as the diffusionof stock.

intermediate
input

energyenv.
capitallaborModeling - Production structure
σ：elasticity of substitute(material flow)
Industrial waste management services

waste 1waste 2…
reusemanageddisposalcommodity 1 … commodity m
σ=0
Activity 1,2,… Industrial waste management services

disposal

reuse

σ=0
aggregatedintermediate input

value added

σ=0

σ=1
capitalenergyNon-energy intermediate
σ=0

σ=0
input 1 … input n…

fuel 1

fuel e

CO2

CO2

labor

recycled(futuredirection)
Aggregated recycled commodity

electricity

Intro - Progress in AIM/CGE Korea
Policy4 stepAnalysis
Empirical test andbase simulation

3 stepModel extension: Dynamic modelwith macroeconomic data,
adjusting consumer behavior
Data mining, Static model with waste
flow, benchmark check, test for
AIM/material CGE in Korea

2 step1 step*Reference - Recycling goods in Korea
Export Trend of Recycling Good in Korea

Export of Recycling Good to Major Countries
11,06012,00030,00025,0009,530

10,00024,31322,07020,000
ton

6,485

8,000

4,608

ton 6,000

3,081

2,690
1,184

4,000

15,00010,741

10,000
5,000

275

6,632

3,739

3,051

0
2,00002000
North Korea

Malayisia

2004

Vietnam

2001

2002

2003

2004

2005

year

Philippines

total export

2005

paperscorrugated cardboard

won/kg200150Price Trend of waste papers
Source from:Korea Environmental and Resource Cooperation

100500
2000

2001

2002

2003

2004

2005

Modeling - method, data, and structure Modeling procedures
1. Gathering data
9 Set definition, define necessary datum, collect data

2. Constructing Social Accounting Matrix (SAM)
9 Making supply and demand equilibrium = balanced SAM
9 Setting up waste material flow = balanced table, total generation =reuse (recycled+) + managed + dump

3. Making Industrial waste flow linked with economic activity
9 Measured by using waste emission factor (source from KEI survey)

4. Define functional relationship based on AIM/material structure
9 Focusing production activity
9 Assumed aggregate household consumption

4. Benchmark check for static model
9 Adjusting for Balanced data, Construct and solve the programModeling - method, data, and structure
DataSource•••

Input-Output Table(2000) – commodity flow
National Accounting(2000) – direct tax, saving
Environmental Protection and expenditure
Survey(2000) - Environmental Protection activity

Bank of Korea•Environmental Pollution Protection IndustrySurvey(2000) - Environmental Investment

Korea Environmental
Industry Association••Total waste Statistical Survey(2001) - Industrial
waste generation per unit output (monetary term)
Waste generation and management(2000) generation and management process, proportion
etc..

Ministry of Environment•

Waste Generation and management

Korea ResourceCooperation•Yearbook of Energy Statistical Survey(2001) Energy Use (Quantity term), Carbon ton per unit
Ton of Energy (www.keei.re.kr)

Korea Energy Economics
InstituteModeling - structure
Diagram of National CGE model in Korea
production ACT(J)

Market OMM(I)

Foreign
Goods and services(i)

Export (i)LEF
Factor CompositeCD

Import good (i)I-pollution Indirect tax Intermediate
Domestic (i)P1~P19L

Non-energy

CLEF

LEF

EnergyTotal Supply

Fossil fuel10a~h(I,J)
recycling

electricity
Tariff (i)I O (i, j)

Total Demand

Quantity Price
CO2Labor

CapitalInter Demand industry

H-Consumption

G-Consumption

Investment

CD
Disposable income
H-income

H-expenditure

Direct tax
Transfer

H-Saving

G-Saving

G-expenditureG-incomeModeling - Empirical test
rate of growth

gdp level

year
year

2028
2028

2025
2025

2022
2022

2019
2019

2016
2016

2007
2010
2010
2013
2013

2004
2007

2001
2004

2001

% ratebillion K-won

5.0000%4.5000%1600000.00
4.0000%1400000.00
3.5000%1200000.00
3.0000%1000000.00
2.5000%800000.00
2.0000%600000.00
1.5000%400000.00
1.0000%200000.00
0.5000%0.0000% 0.00

Future Work - Model Extension
1. Modeling Recycling Market
9 Construct the price linkage system of the aggregatedrecycling goods
9 Collecting and adjusting data for recycling activity(intermediate input, value added, consumption,investment, tax, export and import etc..)
2. Revision of Applied CGE modeling
9 Make consumer transformation matrix (consumerbehavior)
9 Introduce substitution and non-linearized price effect forsensitivity analysis
9 Construct policy scenario and analyze policy impact

Thank you for your attention !!
Please feel free to contact us!
Kim JaeJoon
kjjoon@kei.re.kr
Kang SangInsikang@kei.re.kr