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Economics & Social Sciences Research Program

Global Economic Model Used to Analyze International Trade in Food and Energy Commodities Under IPCC Scenarios

Researchers affiliated with the Population Climate Change (PCC) Program at the International Institute for Applied Systems Analysis (IIASA) in Laxenburg, Austria, recently completed an analysis of economic data from the Global Trade Analysis Project (GTAP), a comprehensive source of production and consumption data with bilateral trade information for 50 sectors and over 40 countries plus other regions that cover the world.

A rigorous energy-balancing procedure, developed by the U.S. Department of Energy (DOE), was applied to data from GTAP that reconciled its input-output (IO) accounts with energy statistics from the International Energy Agency (IEA) by computing energy-prices measured in physical units of energy (e.g., U.S.$/Joule).

Energy prices for each country and region were combined with values from the Intergovernmental Panel on Climate Change (IPCC) that represent the energy content of various fossil-fuels (e.g., oil, natural gas, and coal) to derive emissions coefficients (in tons of carbon, tC) for each dollar of production or consumption in each.

The ESSR Program's global economic model, the Population-Environment-Technology (PET) model, was calibrated to these energy-balanced GTAP data to form a model benchmark or initial condition. Some words on the structure and origins of the PET model are in order. The model was developed at Stanford University and California State University Monterey Bay, with support from DOE and the U.S. Environmental Protection Agency (EPA).

It is based on a standard dynamic computable general equilibrium model that assumes forward-looking behavior drives household savings and consumption decisions, i.e., endogenously through dynamic optimization. In addition, the PET model has a multi-dynastic representation of household age, size, urban/rural status, and other demographic characteristics. Furthermore, it utilizes a set of flexible production functions that can simulate any factor or input specific type of technical change.

For example, labor-augmenting technical change expands the scale of the economy in a uniform way under most conditions such that energy demand increases in proportion to the total size of the economy, while energy-saving technical change reduces the amount of energy used in production per unit of output (i.e., energy-intensity).

Parameters in the PET model for labor-augmenting and energy-saving technical change were tuned such that model output for per capita GDP and total carbon emissions matched scenarios from the IPCC Special Report on Emissions Scenarios (SRES), updated for the period 2000-2100 by the Greenhouse Gas Initiative Program at IIASA. A preliminary set of results from the PET model was used to examine the sensitivity of SRES scenarios to alternative baseline population paths (low, medium, and high) that are plausible under each.

Current work on the PET model is expanding the number of regions and disaggregating trade in food commodities, including fish, among Pacific Rim countries and adding data from national household surveys on consumption patterns, stratified by demographic factors such as age and household size. New results and analyses, including policy simulations of atmospheric carbon stabilization scenarios, are expected through 2009.

In related work, supported by a DOE grant to the University of Illinois at Urbana-Champaign (UIUC), the PET model and energy-balanced GTAP data will be coupled with a global biogeochemical cycles (GBC) model of moderate complexity to produce land-use and climate scenarios for the next century. The AFSC Ocean Acidification Research Plan proposes to extend these scenarios to use as boundary conditions for experiments and impacts in a crab bioeconomic model which is under development in the ESSR Program.

Another project, which is pending final approval from NOAA, will develop an energy-balancing procedure to map output from the REEM Program's ecosystem models for the Gulf of Alaska and the Bering Sea to a standard system of demand equations from microeconomics that can be represented as a set of benchmark conditions in the PET model. The ultimate goal is to provide an analytical framework for REFM researchers to formally link results from ecosystem and economic models in IPCC scenarios.

By Michael Dalton


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