Coupling bottom-up & top-down models for simulations of international energy policy

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1 Coupling bottom-up & top-down models for simulations of international energy policy GEMINI-E3 and TIMES within the TOCSIN FP7 project 1

2 Outline The TOCSIN project The models GEMINI-E3 TIMES Harmonization of the models Coupling the models 2

3 TOCSIN objectives To provide a detailed description of the available energy/technology options that might significantly reduce GHG emissions in China and India and their relative costs in comparison with EU and other OECD members 3

4 TOCSIN objectives (2) To define the possible self-enforcing international agreements on GHG emission abatement, taking into account their economic impacts as well as the possible gains of multilateral and bilateral collaborations, CDM and IET in order to stimulate RD&D cooperation and technology transfers toward China and India 4

5 TOCSIN objectives (3) To enhance capacity for modeling activities in China and India. Researchers from China and India who joined this project will benefit from high level scientific cooperation with leading European researchers and will develop databases and models for China and India that will be fully compatible with the most recent developments in EU and America 5

6 6 GEMINI-E3

7 GEMINI-E3 main features World computable general equilibrium model Total price flexibility Detailed representation of indirect taxation Measure of welfare cost of policies and components Database : GTAP 6 7

8 GEMINI-E3 dynamics GEMINI-E3 is a recursive CGE 4 elements of dynamics Capital accumulation Population growth Technical progress Resources depletion 8

9 GEMINI-E3 regions 14 regions Name GEMINI-E3 Regional Description EUR XEU FSU USA CAN AUZ JAP MEX CHI IND ASI LAT MID AFR Countries European Union (25) Other European Countries Former Soviet Union (except Baltic States) United States of America Canada Australia and New Zealand Japan Mexico China India Rest of Asia Central and Latin America Middle East Africa 9

10 GEMINI-E3 sectors 10

11 GEMINI-E3 Production Function 11

12 GEMINI-E3 Households Exogenous labor supply Stone-Geary specification of utility direct calculation of households surplus Energy price elasticity»

13 GEMINI-E3 Government Government budget Detailed representation of indirect taxation - final consumption - factors of production (labor, capital, inter. cons.) - imports and exports - production necessary in order to take into account fiscal distortions 13

14 GEMINI-E3 World trade Armington assumption Trade closure Trade balanced through exchange rate 14

15 GEMINI-E3 Inputs Social Accounting Matrixes (SAM) by region for the base year Population growth Fossil fuel energy prices Technical progress 15

16 GEMINI-E3 outputs Production sector (inputs, prices) Consumption side (values, prices) External trades (import/export) Household welfare GHGs emissions (CO 2, CH 4, N 2 O, Fluos) Carbon taxes/permit prices 16

17 17 TIMES

18 TIMES main features Successor of the MARKAL model Linear Programming model Local, national or multi-regional energy systems Inter-temporal optimization representing partial equilibrium Technology rich 18

19 TIMES Reference Energy System 19

20 TIMES inputs The demand components of a TIMES scenario future demand in useful energy driven by economy drivers or experts projections The supply components of a TIMES scenario set of supply curves for primary energy and material resources - trading possibilities The policy components of a TIMES scenario emission reductions or taxes. micro measures (e.g. technology portfolios, or targeted subsidies to groups of technologies) broader policy targets (such as general carbon tax, or permit trading system on air contaminants) The techno-economic components of a TIMES scenario set of technical and economic parameters assumed for the transformation of primary resources into energy services 20

21 TIMES outputs PRIMAL SOLUTION A set of investments in all technologies; The operating levels of all technologies; The imports and exports of each type of tradable energy forms and materials; The extraction levels of each primary energy form and material; The flows of each commodity into and out of each technology; The emissions of each substance by each technology, sector, and total; DUAL SOLUTION In addition, the dual solution of the Linear Program provides: The shadow price of each commodity present in the RES (energy form, demand, emission, material); The reduced cost of each technology in the RES, i.e. the required cost reduction to make that technology competitive. (RES=Reference Energy System) 21

22 22 Harmonizing the models Similar baselines

23 Phase I: soft coupling Exogenous assumptions: - World Population (UN2004) - Technical progress (labor) 1. GEMINI-E3 2. GDP Growth TIMES 3. and iterate until convergence Energy prices 23

24 Phase 2: data comparison Energy final demands GHGs emissions World Carbon Emissions in Mtc TIMES GEMINI-E3 24

25 Data comparison (2) US Carbon Emissions in Mtc China Carbon Emission in Mtc TIMES GEMINI-E Emissions are pretty close! India Carbon Emissions in Mtc

26 Coupling the models 26

27 Coupling framework GEMINI-E3 End-use demands changes Fuel mixes Energy prices Technical progress TIMES 27

28 Coupling regions We use TIMES regions (fewer regions) 28

29 Mapping between the 2 models GEMINI-E3 Energy sectors TIMES Commodities Non-energy sectors Households TIMES End-use demands Households: the residential sector and part of transport sector Dwellings: not connected (no energy) 29

30 30 -> Coupling sets

31 Definitions Express the models as functions TIMES is T(D) GEMINI-E3 is G(P,F,θ) 31

32 32 Algorithm

33 GEMINI-E3 changes Same production sectors Integrating fuel mixes The CES functions for fossil energy mix and energy mix become Leontief functions, with shares provided by TIMES Energy consumption (tep) is converted into monetary equivalents, with spending shares provided by TIMES 33

34 GEMINI-E3 changes (2) Coefficient of multiplicative technical progress for energy θ e computed by TIMES runs Re-calibration of the CES functions for the aggregated inputs reflecting the changes in spending on energy: compensation through adjustment of labor remuneration in order to maintain value of production constant Replace CES functions for fossil fuel production sectors by Leontief functions with prices and input shares provided by TIMES: compensation through adjustment in remuneration of fixed factor 34

35 GEMINI-E3 changes (3) Households sector is now a CES function 35

36 TIMES changes Re-projection of end-use demands Detailed commodity uses are summed into the energy commodities needed by GEMINI-E3, for the common definition of the sectors Corresponding fuel mix shares are computed and transferred to GEMINI-E3 Energy efficiency is computed as ratio production / consumption Technical progress is ratio of current energy efficiency to base year value: θ e transferred to GEMINI-E3 36

37 37 Work in progress!