A Computable General Equilibrium Analysis of Electric Vehicle Society in Toyohashi City, Japan

Transcription

1 A Computable General Equlbrum Analyss of Electrc Vehcle Socety n Toyohash Cty, Japan Yuzuru MIYATA Department of Archtecture and Cvl Engneerng, Graduate School of Toyohash Unversty of Technology Tempaku -, Toyohash, Ach, , Japan e-mal: myata@ace.tut.ac.p and Shamsunnahar KHANAM Department of Envronmental and Lfe Scence Engneerng, Graduate School of Toyohash Unversty of Technology Tempaku -, Toyohash, Ach, , Japan e-mal: shamsunnahar_khanam@yahoo.com Abstract: In ths study, we apply a statc computable general equlbrum (CGE) model to nvestgate the economc repercussons of electrc vehcle producton n Toyohash cty n Japan. The results demonstrate that after launchng electrc vehcles, the total ndustral output shows only a slght ncrease. However GDP n automoble ndustry depcts a relatvely large rse. Ths s due to the fact that the number of parts decreases n automoble ndustry resultng n a hgher gross value added rate. Ths leads to a growth n the total GDP of Toyohash cty, and a rse n demand for labor. The ncrease n labor demand may contrbute to the current mbalance n Toyohash cty s labor market, however, that ncrease reduces the household lesure tme resultng n welfare loss. Among others non-ferrous metal manufacturng ndustry gets a sgnfcant postve mpact, suggestng a new ndustral structure to cope wth a low-carbon socety. Keywords: electrc vehcle (EV), CGE model, Toyohash cty, green house gas, smart grd Correspondng author: Yuzuru Myata, Department of Archtecture and Cvl Engneerng, Graduate School of Toyohash Unversty of Technology Address: Tempaku -, Toyohash, Ach, , Japan e-mal: myata@ace.tut.ac.p. Introducton "Global warmng", clmate change, and the "greenhouse effect" are common expressons used to descrbe the threat to human and natural systems resultng from contnued emssons of greenhouse gases (GHGs) from human actvtes. Havng some amount of greenhouse gases s benefcal. Wthout them, the average temperature of the Earth s surface would be rght around 0 o F-not a very nce place to lve. Greenhouse gases also help keep GHG s a gas n the atmosphere that absorbs and emts radatons wthn the thermal nfrared range. Ths process s the fundamental cause of the greenhouse effect. The prmary GHG gases n the Earth`s atmosphere are water vapor, carbon doxde, methane, ntrous oxde, and ozone. - -

2 the Earth s surface at a much more hosptable average temperature almost 59 o F (Al Gore, 2006). However, the recovery, handlng and combuston of the Earth s fnte supply of fossl fuels 2 are damagng envronment (Laurence O. Wllams, 2002), and n the absence of an abrupt shft to non-fossl energy sources, global temperature rse and ts attendant mpacts are predcted to become ncreasngly problematc over the comng decades. Thus, snce the later half of the 980s, global warmng has been a promnent concern n nternatonal polces. As one of the world's leadng ndustral economes, Japan contrbutes a sgnfcant share, and has accounted for a sgnfcant hstorcal share of the emssons that have led to global temperature ncreases (see Fgure ). As such, t s mperatve that Japan, as well as other ndustral countres, adopt polces to reduce so called "greenhouse gas" emssons. Japan had set an obect that durng 2008 to 200 and by 2020, GHG emssons wll be slashed 6% and 25%, respectvely. When we talk about greenhouse gases and clmate change, carbon doxde usually gets the most attenton. CO 2 usually gets top bllng n ths because t accounts for 80 % of total greenhouse gas emssons (Al Gore, 2006). Thus CO 2 emssons dmnuton has become one of the man prortes, as n Japan also the bggest contrbuton of global warmng s CO 2. Japan s emssons assocated wth the energy transformaton sectors are estmated to be over 30 percent (ncludng ndrect emssons) of Japan's total natonal CO 2 emssons. As a consequence, substantal efforts to reduce GHG emssons n the power sector whch accounts for over half of energy transformaton emssons could have a sgnfcant mpact on clmate change mtgaton n Japan 3. Besdes, the recent nuclear crss due to the Great East earth quake n Japan encouraged the government of Japan to set numercal goal to power swtch by ncreasng renewable energy s share of the overall electrcty power supply to 20 % as early as possble n the 2020s and decentralzed electrcty generatons n the local areas. Therefore, t s mperatve to consder swtchng to less carbon-ntensve fuels or renewable sources of energes, especally solar energes, and to popularze them to use n each domestc sector n the suburban areas n Japan to reduce the total CO 2 emssons. The reason of drectng the suburban cty comes from an nfluental study n Ctes and Automoble Dependence: An Internatonal Sourcebook. It shows that the denser urban areas n the developed countres have a greater mxture of land use and lower car dependency, llustratng a trend to lower energy consumpton and emssons (Newman and Jeff Kenworthy, 989). However, the suburban ctes n the developed countres ncludng Japan have a common trend of hgh car dependency, thus ncreasng energy consumpton and emssons. Thus, n order to reduce CO 2 emssons especal focus on the suburban areas, ths research takes vehcle as the subect and s dedcated to ntroduce electrc vehcles and a low carbon socety n Toyohash cty (one of the suburban ctes) n Japan as the study regon. The reason of choosng the transportaton sector s that ths sector accounts for about 23% of the total CO 2 emssons whch are contnuously ncreasng (see Fgure 2), and there are lot of motor vehcle related factores n ths cty. Although t s assumed that the electrc vehcles wll sgnfcantly mpact on reducng CO 2 emssons, a proper economc assessment of ntroducton of electrc vehcle manufacturng s mperatve. The reason s that economc growth has taken prorty due to the shrnk of Japan s economc growths of.2% n 2008 and 5.0% n And t s also expected that the rapd apprecaton of Japanese yen aganst foregn currences, and producton and export growth wll slowdown due to the recent bg earth quake ht n March n 20 n Japan. Therefore, the economc mpact of electrc vehcle producton s worth examnng consderng the current Japanese stuaton. The organzaton of ths artcle s as follows: Sectons 2 explans the structure of the model wth mathematcal formulaton. Secton 3 presents a comparson of electrc and gasolne vehcles. Secton 4 descrbes the economc- 2 the term fossl fuels encompasses a spectrum of mneral organc compounds extracted from the earth. They range from solds to lquds and gases. They nclude coal, petroleum, shale ol, tar sands and natural gas. All fossl fuels produce carbon doxde, a greenhouse gas, when burned. When there s nsuffcent ar all fossl fuels produce hghly toxc carbon monoxde. 3 Masam Nakata et, al (2003), Carbon Doxde Emssons Reducton Potental n Japan s Power Sector Estmatng Carbon Emssons Avoded by a Fuel-Swtch Scenaro - 2 -

3 Fgure. Average Global Temperature to Rse Fgurre 2. Increasng Number of Vehcles n Toyohash accountng matrx of Toyohash Cty. Secton 5 dscusses parameters settng and smulaton cases. Secton 6 summarzes smulaton results. Fnally Secton 7 presents the concludng remarks wth future study. 2. The Model 2. Assumptons of the Model Man assumptons made n our model are as follows: () 2005 Toyohash cty s economy s examned. Economc agents are households, frms n ndustres, the government and the external sector. (2) 33 markets are consdered. They are commodty markets, one labor market and one captal market. These are assumed to be perfectly compettve, and n equlbrum n ndustres Table. Classfcaton of Industres. agrculture, forestry, & fshery 7.electronc components ndustres 2. mnng 8.automoble 3. beverages and Foods 9. arcraft 4. textle 20.other transportaton equpment 5. pulp, paper and wooden 2.precson nstruments 6. chemcal 22.other manufactured 7. petroleum and coal 23.constructon 8. plastcs 24. electrcty, gas and heat supply 9. ceramcs 25. water supply and waste dsposal busness 0. other ceramc, stone and clay 26. commerce. ron and steel 27. fnance and nsuance 2. non-ferrousmetals 28. realestate 3. metal products 29. transport 4. general machnery 30. nformaton and communcatons 5. electrcal machnery. servces 6. nformaton and communcaton electroncs equpment 2.2 Industres In ndustres ntermedate nput, labor and captal are nvested to produce goods. Industres have Leontef technology wth respect to ntermedate nput and value added nputs, and Cobb-Douglas technology for both ntermedate nputs, and labor and captal nputs (see Fgure 3). Due to homogenety n producton technology, ndustres' behavor becomes cost mnmzaton under the gven commodty demands and prces, whch can be wrtten as, - 3 -

4 mn p x + ( + tp )( wl + rk = wth respect to X, L and K subect to ) ( =,, ) () x x X = mn[ f ( L, K ),,..., ] (2) a a a 0 f a ( a ) ( L, K ) A L K (3) where p : prce of commodty x : ntermedate nput of ndustry 's product n ndustry tp : net ndrect tax rate mposed on ndustry s product (ndrect tax rate - subsdy rate) w : wage rate r : captal return rate L : labor nput n ndustry K : captal nput n ndustry X : output n ndustry a 0 : value added rate n ndustry a : share parameter on ntermedate nput x A,α : techncal parameters n ndustry Cost mnmzaton problem () to (3) yelds condtonal demands for ntermedate goods, labor, and captal n producton process. X = a X (4) ( α) r α a X 0 LD = [ ] (5) α w A household utlty ndustral output CES Leonteff current goods lesure tme savng nvestment ntermedate nput types of ndustres labor value added captal Cobb-Douglas Cobb-Douglas Fgure 3. Herarchcal Structure of the Model - 4 -

5 KD a w ( a a X ) 0 = [ ] (6) r ( a ) A where LD : condtonal demand for labor n ndustry KD : condtonal captal demand n ndustry Zero proft condton s realzed n ndustres under perfect competton. proft = p X px = ( + tp )[ w. LD + r. KD ] = 0 (7) 2.3 Households Households n Toyohash cty are assumed to be homogeneous wth the fxed number of households. Thus one can consder that households share an aggregate sngle utlty functon. Households share a CES utlty functon of the current and future goods. Here the current good s defned as a CES composte of current consumpton goods and lesure tme, whle the future good s derved from savng. Households choose a bundle of the current and future goods so as to maxmze the utlty functon wth a budget constrant. Then the present good s dvded nto a composte consumpton good and a lesure tme (labor supply). Household ncome conssts of full wage ncome, whch s obtaned when households supply ther full labor endowment, captal ncome after captal deprecaton, current transfers from the government, labor ncome, property ncome, and other current transfers from the external sector. A part of household wage ncome and captal ncome s transferred to the external sector. Household drect tax s mposed on the after current transfers ncome. Then households are assumed to allocate ther after drect tax ncome on present and future goods. Here drect tax s supposed to nclude all current transfers from households to the government for smplcty. To explan the household behavor, frst, dervaton of future good s descrbed here. The future good mples the future consumpton whch derved from household savng, however, the savng formulates captal nvestment. Therefore captal good can be regarded as savng good. Investment s made by usng produced goods, and let ther portons n nvestment be denoted by b. Denotng the prce of nvestment good by p I, p I = I = p I s realzed. Then the prce of nvestment good s expressed as p I = = b p. Ths can be regarded as the prce of savng good ps. Snce the captal returns after drect tax by a unt of captal necton s expressed by (-ty)(-k )(-k )rδ, the expected return rate of the prce of savng good p s, that s, the expected net return rate of household savng r s s wrtten as follows: r = ( ty)( k ) rδ / p s r s where ty : drect tax rate mposed on households k o : rate of transfer of property ncome to the external sector k r : captal deprecaton rate δ : rato of captal stock measured by physcal commodty unt to that by captal servce unt (8) - 5 -

6 It s assumed that the expected returns of savng fnance the future consumpton. Regardng the prce of future good as the prce of the present consumpton good under the myopc expectaton, and denotng the household real savng by S, the followng equaton holds. p H = ( ty)( k )( k ) rδ S (9) o r Ths yelds [p s p/(-ty)(-k )(-k )rδ]h=p S, and settng the prce of future good p H assocated wth the real savng S as; p = p p /( ty)( k )( k rδ (0) H s o r ) Then p s S = p H H s realzed. Employng the above-mentoned future good and ts prce, household utlty maxmzaton problem s now specfed n the followng. Regardng current good, t wll be descrbed n a later part. max u( G,H ) { α G, H / v ( v ) / v / v ( v ) / v v /( v ) G + ( α ) H } () subect to (2) p G + p H = ( ty) FI TrHO G H FI ( l ) w E + LI + ( k )( k ) r KS + KI + TrGH TrOH (3) o o r + where α : share parameter v : elastcty of substtuton between the current good and future good G : household present consumpton H : household future consumpton p G : prce of current good p H : prce of future good FI : household full ncome TrHO : current transfers from households to the external sector l o : rate of labor ncome transferred to the external sector E : household ntal labor endowment, whch s set up as the double of real workng tme. Ths s based on the actual workng tme and lesure tme n Toyohash cty. LI : labor ncome transferred from the external sector to households (exogenous varable) KS : ntal captal stock endowed by households KI : property ncome transferred from the external sector to households (exogenous varable) TrGH : current transfers from the government to households TrOH current transfers from the external sector to households Solvng ths utlty maxmzaton problem, demand functons for present and future goods are obtaned yeldng a household savng functon. [( ty) FI TrHO] G = α (4) v p G H ( α)[( ty) FI TrHO] = (5) v p H - 6 -

7 S = p H / α H p s (6) v v p G + ( α) p H (7) Then we descrbe the dervaton of demands for composte consumpton and lesure tme from the current good G. The current good G s a composte of consumpton and lesure tme, and G s obtaned from the followng optmzaton problem. max G { β C, F /v 2 ( v2 ) / v2 / v2 ( v2 ) / v2 } v2 /( v2 ) C + ( β ) F (8) subect to p C + ( ty)( l ) w F = ( ty) FI TrHO SH o (9) where β : share parameter v 2 : elastcty of substtuton between composte consumpton and lesure tme C : composte consumpton F : lesure tme p : prce of composte consumpton good SH : household nomnal savng ( P S S ) Solvng ths utlty maxmzaton problem, demand functons for composte consumpton, lesure tme, and labor supply are obtaned. [( ty) FI TrHO SH ] C = β (20) v2 p Ω ( β )[( ty) FI TrHO SH] F = (2) v2 [( ty)( l o ) w] Ω LS = E F (22) Ω = βp 2 + ( β )[( ty)( l ) w ] ( v ) ( v 2 ) o (23) where LS : household labor supply Substtutng composte consumpton (20) and lesure tme (2) nto (8), the prce ndex of the present good s derved as follows: p G = { β p 2 + ( β )[( ty)( l ) w] } v v2 /( v2 ) o (24) Moreover, composte consumpton good s dsaggregated nto produced goods through the maxmzaton of a Cobb-Douglas sub-sub utlty functon gven the household ncome and lesure tme. max C γ C ( 8 = = γ = ) (25) subect to = p C = ( ty) Y TrHO SH (26) - 7 -

8 where C : household consumpton good produced by ndustry p : prce of good Y : household ncome ( =(-l o )w LS+LI+(-k o )(-k r )r KS+KI+TrGH+TrOH ) From ths optmzaton problem, consumpton good s derved. γ C = [( ty) Y TrHO SH ] ( =,,) p (27) The prce of composte consumpton s calculated as follows: p = = γ p γ (28) 2.4 The Government The government obtans ts ncome from drect and net ndrect taxes of Toyohash cty, and current transfers from the external sector, and then t expends the ncome on government consumpton, current transfers to households, and current transfers to the external sector. The dfference between ncome and expendtures are saved. Nomnal consumpton expendtures on commodtes/servces are assumed to be proportonal to the government revenue wth constant sectoral share. These are expressed as the followng balance of payments. = p CG + TrGH + TrGO + SG = ty Y + tp ( w LD + r KD ) + TrOG = (29) where CG : government consumpton expendtures on commodty TrGH : current transfers to households TrGO : current transfers to the external sector SG : government savngs TrOG : current transfers from the external sector 2.5 The External Sector The external sector gans ts ncome from Toyohash cty s mports, current transfers from the government, labor ncome transfers, and property ncome transfers. And then t expends the ncome on exports and transfer of Toyohash, current transfers to households and the government, labor (employees to the cty of Toyohash) and property ncome transfers. These are also descrbed as the followng balance of payments. = p EX + TrOH + TrOG + KI + LI + SO = p EM + TrHO + TrGO + KIO + LIO = (30) where EX : export of commodty EM : mport of commodty SO : savngs of the external sector ( =-natonal current surplus) LIO : labor ncome transfers to the external sector (= l w LS ) KIO : property ncome transfers to the external sector (= k 0 r KS ) - 8 -

9 2.6 Balance of Investment and Savng Household, government, area department`s savngs, the total consumpton of fxed captal, whch determnes the total nvestment. p I = SH + SG + SO + = = DR () where I : demand for commodty by other nvestments DR : consumpton of fxed captal amount of ndustry 2.7 Prces Cost conssts of the followng s derved from the Zero proft condton of the ndustry. p X = = p x + ( + tp )[ w LD + r KD ] ( =,, ) (32) Gven a wage and a captal return rate, we can formally calculate commodty prces as follows: P = ( I A ) [( + tp )( wld. + r kd )] (33) where P : vector of commodty prces A': transposed matrx of ndustres' nput coeffcents [ ] column vector whose elements are n parentheses ld LD / X and kd KD / X 2.8 Dervaton of Equlbrum In ths model there are ndustres, and 33 markets ncludng labor and captal markets. The equlbrum condton n the model can be summarzed as follows Commodty market M X a = M a X L a O M L a X M X C + M C CG + M CG I + M I EX + M EX EM M EM (34) Labor market LS = = LD (35) Captal rental market KS = = KD (36) To solve all the endogenous varables of the study, t requres a model of all formulas, expresson alone s nsuffcent to balance. Walras law n ths study s, Total value of excess demand for labor - Total value of the excess demand of captal = 0. In numercal computaton, teraton for the equlbrum prces s made on the captal return rate lettng labor be the numerare (w=)

10 3. Comparson of Electrc and Gasolne Vehcles From the outsde, the electrc vehcle looks lke a gasolne-powered vehcle wth the excepton that the electrc vehcle does not have a tal ppe. However, nternally, t s qute a dfferent story. The electrc vehcle has several unque components that serve the same functon as the more common components n a gasolne powered vehcle. Another sgnfcant dfference between electrc vehcles and gasolne-powered vehcles s the number of movng parts (see Fgure 4). The electrc vehcle has one movng part, the motor, whereas the gasolne-powered vehcle has hundreds of movng parts. Fewer movng parts n the electrc vehcle lead to another mportant dfference. The electrc vehcle requres less perodc mantenance and s more relable. The gasolne-powered vehcle requres a wde range of mantenance, from frequent ol changes, flter replacements, perodc tune ups, and exhaust system repars, to the less frequent component replacement, such as the water pump, fuel pump, alternator, etc. The electrc vehcle s mantenance requrements are fewer and therefore the mantenance costs are lower. Not only dfference n the number of parts and mantenance cost, compared wth manstream gasolne and desel cars of today's car, a car equpped wth electrc vehcle has a great advantage n terms of energy effcency and carbon doxde emssons (see Fgures 5 and 6). By usng EV nstead of gasolne vehcle can reduce energy consumpton /3 and CO 2 emssons by ¼. Moreover, hybrd cars use gasolne, so there s no fundamental soluton for reducng the CO 2 emssons. And fuel cell vehcle, a large amount of nfrastructure costs for usng hydrogen as a fuel, there s a problem of. Fgure 4. Gasolne and Electrc Vehcles Components Fgure 5. Well to Wheel CO 2 Emssons Fgure 6. Well to Wheel Energy Consumpton - 0 -

11 Therefore, electrc vehcle s consdered the most potental to reduce envronmental mpacts when t wll use renewable sources of energes, and electrc vehcles among the next-generaton vehcles. In general, electrc vehcles, vehcles from the body durng runnng, not CO 2 emssons, nose s very small, s sad to be partcularly good car n terms of envronmental polluton. In order to solve the envronmental problems caused by the gasolne used vehcles, electrc vehcle s an mplcaton plan to ensure resource crculatons n socety, safety and securty, and low carbon socety (see Fgure 7). gasolne vehcle electrc vehcle fossl fuel solar energy resource depltons problem ncreases greenhouse gas resource crculatons plan and purpose reduces greenhouse gas emssons resource exhauston, and global warmng resources renewal, and low carbon socety Fgure 7. Electrc Vehcles to Reduce Emssons, and to Offer Low Carbon Socety - -

12 4. Socal Accountng Matrx of Toyohash Cty In ths secton we present a 2005 socal accountng matrx of Toyohash cty n Table 2. Ths matrx was estmated based on Toyohash cty IO table whch was estmated 2005 Ach prefecture IO table. The socal accountng matrx s usually appled as a bench mark data set n CGE modelng. In column and row, the same economc agents are located, and each cell n the matrx stands for monetary transacton between economc agents. Lookng at Table 2, we see that ndustres produce 3,52 bllon of goods and servces. By the producton actvtes, captal ncome of 499 bllon yen nd labor ncome of 970 bllon yen are yelded. The government sector obtans ts ncome of 568 bllon yen from drect taxes, net ndrect taxes and current transfers. Households get ncome of,67 bllon yen and spend a part of ncome on consumpton of 935 bllon yen. producton actvtes nsttuton producton factors economc sectors captal fnance external sector total (n mllon yen) Table 2. Socal-Accountng Matrx of Toyohash Cty n Japan producton actvtes nsttuton producton factors ndustres government households captal labor ndustres,298, , ,725 captal accumulaton ,666 external sector 25,395 government 5, , , ,985 households 0 62, , , ,65,66,800 captal 498, ,892 labor 922, ,29 970,404 7,492 4, , , ,24 32,465 52,645 49,882 80, ,25 3,52, ,985,66, , ,404 68, ,25 8,09,66 total 3,52, Parameter Settng and Smulaton Cases 5.. Parameter Settng For numercal experments, t s necessary to estmate parameters n functons specfed n the model. Parameters n the model are calbrated by employng 2005 actual data of Toyohash cty IO table. The technologcal parameters n the producton functons n ndustres are specfed as Leontef-Cobb-Douglas type, they can easly be estmated by applyng the benchmark data set n a usual CGE- modelng framework. The detaled results of parameter estmaton are beyond the scope of ths paper, therefore, they are skpped. For the parameter n the utlty functon, estmaton of them s made n a standard way wth results shown n Table 3 though the descrpton of the estmaton method s skpped as well. Table 3. Parameters of Utlty Functon current good future good elastcty of substtuton between presnt and future goods.836 composte comsumpton lesure elastcty of substtuton between composte consumpton and lesure tme share parameter

13 Table 4. Techncal Parameters for Producton Functon ndustres. agrculture,forestry &fshery 2. mnng 3. beverages and Foods 4. textle 5. pulp, paper & wooden. 6. chemcal 7. petroleum & coal 8. plastcs 9. ceramcs 0. other ceramc, stone & clay. ron and steel 2. non-ferrous metal 3. metal products 4. general machnery 5. electrcal machnery 6. nformaton & communcaton electronc equpments 7. electronc components 8. automoble 9. arcraft 20. other transportaton equpment 2. precson nstruments 22. other manufactured 23. constructon 24. electrcty, gas & heat supply 25. water supply & waste dsposal busness 26. commerce 27. fnance and nsuance 28. realestate 29. transport 30. nformaton & communcatons. servces rate of value added effcency parameter captal elastcty labor elastcty

14 Table 5. Composte Commodty Consumpton Elastcty Parameter ndustres. agrculture,forestry & fshery 2. mnng 3. everages & Foods 4. textle 5. pulp, paper & wooden. 6. chemcal 7. petroleum & coal 8. plastcs 9. ceramcs 0. other ceramc, stone & clay. ron & steel 2. non-ferrous metal 3. metal products 4. general machnery 5, eectrcal machnery 6. nformaton & communcaton electronc equpment 7. electronc components 8. automoble 9. arcraft 20. other transportaton equpment 2. precson nstruments 22. other manufactured 23. constructon 24. electrcty, gas and heat supply 25. water supply & waste dsposal busness 26. commerce 27. fnance& nsuance 28. realestate 29. transport 30. nformaton & communcatons. servces composte commodty consumpton elastcty parameter

15 5.2. Smulaton Analyss In ths secton, two cases are smulated and they are as follows: () Busness as usual case (Base case) (2) Case (where 00% electrc vehcles are produced) Base case assumes that the automoble ndustry n Toyohash cty produces motor vehcles followng the current system,.e. most of produced vehcles are gasolne vehcles. Case assumes that the automoble ndustry produces 00% electrc vehcles. The dfference between the two cases s nput coeffcents n IO table of Toyohash cty. Table 6 llustrates nput coeffcents n gasolne and electrc vehcle sectors. The smulaton s conducted by changng the nput coeffcents. Table 6. Input Coeffcents n Gasolne and Electrc Vehcle Sectors ndustres. agrculture,forestry & fshery 2. mnng 3. everages & Foods 4. textle 5. pulp, paper & wooden. 6. chemcal 7. petroleum & coal 8. plastcs 9. ceramcs 0. other ceramc, stone & clay. ron & steel 2. non-ferrous metal 3. metal products 4. general machnery 5, eectrcal machnery 6. nformaton & communcaton electronc equpment 7. electronc components 8. automoble 9. arcraft 20. other transportaton equpment 2. precson nstruments 22. other manufactured 23. constructon 24. electrcty, gas and heat supply 25. water supply & waste dsposal busness 26. commerce 27. fnance& nsuance 28. realestate 29. transport 30. nformaton & communcatons. servces gasolne car electrc car

16 6. Smulaton Result In ths secton we present the smulaton results referrng to some mportant economc varables. 6.. Amount of Industral Producton Changes n ndustral outputs are shown n Fgures 8 and 9. Large output level s found n sectors of servce, commerce, automoble and constructon, and one can see that automoble related ndustres are large n Toyohash cty because Toyota Motor Company s located near Toyohash cty. After electrc vehcles beng put nto operaton, the total ndustral output slghtly ncreases. Partcularly a large ncrease s found n non-ferrous metals (ncrease rate of 74.%), because a lot of non-ferrous metals are necessary for producng batteres used n electrc vehcles. Increases n outputs are also found n mnng (0.3%), constructon (9.4%), precson machne (7.0%), general machne (5.6%) and electrcty, gas and heat supply (4.8%). The ncrease n output of nonferrous metals mght be a lttle large, but actually the batteres used n electrc vehcles should be much produced demandng a lot of non-ferrous metals. Ths result has also been confrmed by the nput-output analyss of Japan s economy, and can be concluded as that t s qualtatvely plausble. Fgure 8. Amount of Industral Producton Fgure 9. Change Rate of Industral Outputs - 6 -

17 The mpact on mnng s attrbuted to an ncrease n non-ferrous metal output. Regardng the mpact on constructon, the captal outflow from Toyohash cty decreases due to an ncrease n output of mport orented ndustres resultng n an ncrease n cty savngs. Thus the captal nvestment grows leadng to an expanson n the constructon sector. Increases n precson machne, general machne and electrcty, gas and heat supply are obtaned from the dfference n the component of parts and/or processng n the electrc vehcle producton. The output of automoble ndustry shows a decrease of -9.3%, and t s nterestng. The reason s attrbuted to the fact of the less number of parts n electrc vehcles. That s, the economc repercusson of producng electrc vehcles on other relatng ndustres becomes less as compared wth gasolne vehcles. Producng electrc vehcles once gve a negatve mpact on Toyohash s economy, but t suggests the necessty of transformaton of the current ndustral structure to compensate the negatve mpact. 6.2 Cty GDP The cty GDP s defned as gross value added n the cty. As shown n Fgures 0 and, the manner of changes n the cty GDP s by sector s smlar to that of ndustral outputs. However of nterestng s an ncrease n Fgure 0. Cty GDP Fgure. Change Rate of Cty GDP - 7 -

18 GDP of automoble ndustry by 4.%. Ths s because the value added rate n automoble ndustry rses resultng from the less number of parts s electrc vehcles. Thus ncreases n wage rate and/or n frms proft are observed n electrc vehcle producton resultng n stmulus to household consumpton expendtures as a general equlbrum effect, whle the repercusson effect of gasolne vehcle manufacturng goes to automoble ndustry tself. However despte the fact of ncreases n wage ncome and operatng surplus, the captal return rate shows a growth resultng from rases n demands for captal and labor. Thus commodty prces go up leadng to a decrease n the real wage rate. And household consumpton expendtures decrease due to the ncome effect caused by a fall n the real wage rate. However Toyohash s total real GDP grows by 0.9% Labor Demand Lookng at changes n labor demands by sector n Fgures 2 and 3, one can see that changes n labor demands are smlar to those n GDP s by sector. That s, although the output of automoble ndustry shows a decrease, the labor demand n that ndustry depcts a rse of 4.3%. Ths s caused by an ncrease n the gross value added rate n automoble ndustry. The growth n the total labor demand shows.6% whch s hgher than 0.9% growth n the Fgure 2. Labor Demand n Industres Fgure 3. Change Rate of Labor Demand - 8 -

19 real GDP. Takng nto account the current serous stuaton of ob opportunty n Toyohash cty, the ncrease n labor demand may be nterpreted as a postve fact. However ths reduces lesure tme mplyng that the household utlty would show a decrease n some case Captal demand Snce the total captal endowment by households s fxed n ths model, the total demand for captal s not changed after the ntroducton of electrc vehcles. Lookng at changes n captal demand by ndustry n Fgures 4 and 5, the manner of changes are smlar to that of ndustral GDP s. However due to the fxed captal supply, postve growths n captal demands by sector are slghtly depressed, and negatve growth are enhanced. Partcularly the captal demand n automoble ndustry llustrates an ncrease of 3.6% whle that of labor demand s 4.36% showng a slghtly depressed rse. Fgure 4. Captal Demand Fgure 5. Change Rate of Captal Demand - 9 -

20 6.5. Commodty prces Commodty prces are determned by factor prces as presented by equaton (33). Snce the numerare s set up as labor n ths model, the captal return rate s adusted for equlbratng the markets. The captal return rate s determned so as to equlbrate the total captal supply and demand. After ntroducng the electrc vehcle producton, the demand for captal tends to ncrease resultng n an ncrease of 0.7% n the captal return rate. Reflectng ths rse, all commodty prces go up rangng n the nterval of 0.22% to 0.63%. Observng Fgures 6 and 7, the hghest up s 0.63% n real estate ndustry, whle the lowest one s 0.22% n constructon ndustry. Ths result s attrbuted to that the captal nput rato n real estate s largest across ndustres, and conversely n constructon the large part of gross value added conssts of labor ncome. In many cases, ncreases n commodty prces get lower the real wage rate leadng to welfare loss. Fgure 6. Commodty Prces Fgure 7. Change Rate of Commodty Prces

21 6.6. Other varables Let us look at Fgures 8 and 9 to see changes n other varables. Large ncrease rates are found n the total nvestment, net ndrect tax, labor supply, captal return rate and the prce of composte consumpton good. The reason of the large growth n the total nvestment s that outputs of mport orented ndustres grows, the captal outflow to the rest of the world decreases, and then fnance to nvestment ncreases. The reason of the ncrease n ndrect tax s due to a rse n the gross value added. The ncrease n the labor supply corresponds to a growth n the labor demand assocated wth up n the gross value added rate. The ncrease n the captal return rate s due to a growth n captal demand by an ncrease n the gross value added rate as well. The up n the prce of composte consumpton good results from the ncrease n the captal return rate. Fgure 8. Other Varables Note: TRGH : current transfer from the government to households TRGO : current transfers from the government to the rest of the world EV : equvalent varaton Fgure 9. Rate of Change n Other Varables - 2 -

22 Conversely falls are found n household ncome and the government revenue. Those are attrbuted to that a decrease n the ncome dstrbuted n Toyohash cty resultng from an ncrease n current transfers to the rest of the world. In the household sector, due to a decrease n nomnal ncome and a rse n commodty prces, both the household ncome and lesure tme decrease resultng n welfare loss of 50.8 bllon yen, beng equvalently 40 thousand yen per capta. 7. Concludng Remarks In ths study, we have developed a computable general equlbrum (CGE) model to nvestgate the economc repercussons of electrc vehcle producton n Toyohash cty n Japan. The smulaton are conducted for two cases: () busness as usual (base case) and (2) 00 % producton of electrc vehcles n the automoble ndustry (case ). The results have demonstrated that after launchng electrc vehcles, the total ndustral output only slghtly grows but GDP of the automoble sector ncreases by 4.%. The reason s attrbuted to the fact that the number of parts s reduced n electrc vehcle manufacturng resultng n a hgher value added rate. Ths should be hghlghted n ths study. Moreover the labor demand goes up as well mplyng a contrbuton to the current mbalance n Japan s labor market. However there s no concept of unemployment n ths CGE modelng, so an ncrease n labor demand reduces the household lesure tme leadng to welfare loss. For Toyohash cty, t should focus on a new ndustral structure to cope wth a change of producton system. Partcularly t s necessary to promote ndustres such as non-ferrous metal manufacturng where a large economc mpact appears and to attempt to ncorporate such mpact nto Toyohash cty s economy. Ths research has ust started from a startng lne, thus there wll be many ponts worth nvestgatng n the future. Partcularly the estmaton of cty s data s pror to other ponts. Usually a CGE model heavly depends on an nput-output (IO) table. Ths study estmated Toyohash cty s IO table, but the estmated IO table shows an nconsstency a lttle. Therefore more precse estmaton mght be necessary. Fnally ths paper s focusng on the producton process of electrc vehcles, however, soco-economc mpacts of spread of electrc vehcles seems to be more mportant than producton. Spread of electrc vehcles would greatly reduce the carbon doxde emssons. On the other hand, the future low carbon socety could requre alternatve sources of energes lke solar, wnd, etc., and ntroduce the smart grd to control electrcty supply. Future studes wll nclude these perspectves. References Al Gore (2006), An nconvenent truth: the planetary emergency of global warmng and what can do about t, Emmaus, Pa.: Rodale Press, pp Hans Joachm Schelluhuber; Wolfgang Cramer. et al., (2006), Avodng dangerous clmate change, Hans Cambrdge. U. K.: Cambrdge Unversty Press. H, Welsch and F. Hoster (996), A General Equlbrum Analyss of European Carbon/Energy Taxaton, Zetschrft für Wrtschafts, 5, Mchael Tennesen (2008), The complete dot s gude to global warmng, 2 nd ed. New York, N.Y.:Alpha. Masam Nakata et, al (2003), Carbon Doxde Emssons Reducton Potental n Japan s Power Sector Estmatng Carbon Emssons Avoded by a Fuel-Swtch Scenaro John Fror (990), The changng atmosphere: a global challenge: hbk, New Haven: Yale Unversty Press. John B. Shoven and John Whalley (992), Applyng General Equlbrum, Cambrdge Unversty Press. Laurence O. Wllams (2002), An end to global warmng, Oxford: Pergamon, pp.-2. Rudger Dornbusch and James M. Poterba (99), Global warmng: economc polcy responses, Cambrdge, Mass.: MIT Press

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