NEW INDUSTRIAL STRUCTURE COPING WITHTHE ECONOMIC IMPACTS OF SHIFTING PRODUCTION TO BATTERY-BASED ELECTRIC VEHICLES IN

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1 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp NEW INDUSTRIAL STRUCTURE COPING WITHTHE ECONOMIC IMPACTS OF SHIFTING PRODUCTION TO BATTERY-BASED ELECTRIC VEHICLES IN TOYOHASHI IN JAPAN A CGE MODELING APPROACH- Shamsunnahar KHANAM School of Envronmental and Lfe Scences, Toyohash Unversty of Technology, Japan shamsunnahar_khanam@yahoo.com Yuzuru MIYATA School of Archtecture and Cvl Engneerng, Toyohash Unversty of Technology, Japan myata@ace.tut.ac.p Abstract After nearly a century wth the nternal combuston engne domnatng the personal transportaton sector, t now appears that the demands of Battery-based Electrc Vehcles (BEVs) producton are on the verge of experencng rapd growth n Japan vehcle market. The broad-scale adopton of the BEVs could brng sgnfcant changes for our socety n terms of movng the economcs away from petroleum and lessonng the envronmental footprnt of transportaton. However as Japanese economy strongly depends on the automoble ndustry, shftng producton systems n the automoble ndustres nfluence not only the automoble ndustry but also other ndustres. Especally ndustral regons where automoble frms are concentrated lke n Toyohash cty n Japan wll be affected by new producton system. Thus, t s worth to acquant wth a new ndustral structure for preventng the shortcomng by shftng producton. In essence, ths paper provdes a computable general equlbrum (CGE) model to nvestgate the economc repercusson of BEVs producton n the automoble ndustres, afterward suggests a new ndustral formaton to cope wth the change of producton system to BEVs n Toyohash cty n Japan. The most mportant database for CGE model calbraton s a socal accountng matrx (SAM). However nput-output (I-O) table and the SAM are not avalable n Toyohash cty, thus the I-O table and SAM are also estmated n ths study. Keywords: CGE model, BEVs, gasolne vehcles (GVs), greenhouse gas (GHG), carbon doxde (CO 2 ), Toyohash cty, Japan JEL classfcaton: R0, R.. Introducton Snce the ndustralzaton, the appearance of ctes has been enhancng great changes of people s lves by mass producton and mass consumpton, Shbusawa & Myata [3] (2008). On the other hand, ndustralzaton causes many envronmental ssues such as GHG emssons, clmate change, freshwater scarcty, deforestaton, global warmng, polluton, etc. due to the anthropogenc actvtes for example fossl foul combuston (e.g, natural gas, coal and petroleum) s used n power ndustral process and motor vehcles. Several studes n natural scences ncludng e.g. Houghton et al., [5] (996), have warned us of a possble future sgnfcant damage on our socety due to global warmng. Lookng at the global envronmental ssues from the vewpont of regonal competton, t has become a serous problem as to whch countres/ regons

2 06 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp and how much they should share the envronmental burdens sheddng another lght on the North and South problem. To curb the regonal problems two maor envronmental summts: Kyoto Protocol (997) and Copenhagen Summt (2009), have taken maor feature that set bndng targets for the ndustralze countres ncludng Japan for reducng GHG emssons. Japan had set an obect that between 2008 and 200, and by 2020, GHG emssons wll be slashed by 6% and 25% respectvely. Thus, GHG emssons dmnutons have become one of the man prortes to Japan. Therefore, for an mmedate reducton of CO 2 emssons, transportaton sector s targeted for Japan to acheve the goal of GHG emssons reducton as per Kyoto Protocol. As the largest and growng fracton of GHG emssons mostly n the form of CO 2 from transportaton sector, present a maor challenge to global clmate change mtgaton efforts, Valere et al., [22] (200). Worldwde transportaton ranks second after electrc power as the largest source of emssons, contrbutng about 20% of the total n recent trends and future proectons, IEA [7] (2006). In the case of Japan smlar to the world trend transportaton accounts for more than one-ffth of en-use sector CO 2 emssons, MOE [] (2007). Especally, emssons generated from passenger and freght cars domnate 90% of the sector, MOE [0] (997), and alone personal vehcles contrbute 50% of transportaton emssons n Japan, GGIOJ [4] (2008). In addton, t s expected that CO 2 emssons wll be ncreasng because of expendng personal vehcles fleets especally n the sub-urban areas lke Toyohash cty n Japan (see Table ). In Japan, envronmental consderaton lately are brngng pressure on car manufactures to produce BEVs n order to spread of envronmentally frendly vehcles hoppng CO 2 emssons reducton from transportaton sector. However the problem of global fnancal downturn n forcng Japan to rethnk about the economc development as well as the global economc recessons has also result the collapsed n domestc demand shrunk Japanese economy.2% and 5% n the year of 2008 and These stuaton puttng Japan s natonal budget nto a stuaton where, the demand for nvestment socal welfare sectors lke medcal expenses, penson, and nursng care are ncreasng. As a result, the proper forecast of the economc mpacts of BEVs producton seems pror consderng the current Japanese economc stuaton. Because t s expected that the new generaton automobles wll become popular n several decades, so the ndustral structure may be affected by the new producton system. Snce the Japanese economy strongly depends on the automoble ndustry, shftng producton system n the automoble ndustres nfluence not only the ndustres related to car manufacturng but also other ndustres. Especally ndustral regons where automoble frms are concentrated lke Toyohash cty wll be affected by new producton system. Therefore, t s worth to acquant wth a new ndustral structure for preventng the shortcomng by shftng producton. In ths paper, we suggest a new ndustral structure to cope wth shftng producton to BEVs n Toyohash cty of Japan, leavng the envronmental mpact, popularzaton of BEVs and new energy supply as future research area. In essence, ths study provdes a CGE model to nvestgate the economc repercussons of BEVs producton n automoble ndustry of Toyohash cty n Japan, afterwards we suggest a new ndustral formaton to deal wth the new producton system of Toyohash cty n Japan. The cty s consdered as a study regon for three reasons: () the numbers of vehcles n the cty are ncreasng rapdly, thus CO 2 emssons are seen an ncreasng trend, (2) the cty has many motor vehcle ndustres ncludng Toyota Motor Company, one of the world s largest automoble manufacturers by producton, and (3) most mportantly the GDP of the cty s heavly depends on the car export. The rest of the paper s organzed as follows. In secton 2, materal and methodology of the study are descrbed. Secton 3 explans the assumptons of the model and behavors of the economc agents. In secton 4, parameter settngs and smulaton cases are gven whereas Secton 5 the results of the smulaton are dscussed, and fnally n Secton 6 summarzes the concluson.

3 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Table. Increase n number of personal vehcles and CO 2 emssons n Toyohash cty, Japan (source: [2]). year total number of personal vehcle total emssons mt/co2 89, ,839 25, , Materal and Methodology 2.. Study Area Toyohash cty (see Fgure ) s stuated on the southern edge of Ach Prefecture n Japan. The cty borders Shzuoka Prefecture and the Yumhar Mountans. The Pacfc Ocean s n the south of the cty and the cty opens onto Mkawa Bay n the west. Mkawa port s a maor port for worldwde trade, and ts presence has made Toyohash an mportant cty as the bggest mport and export hub n Japan for automoble, n volume term. Compared to other parts around the world, Mkawa port s roughly on a par wth the Garman port of Bremerhaven. There are many motor vehcle ndustres n Toyohash cty ncludng Toyota Motor Company (one of the world s largest automoble manufactures by producton), Mtsubsh, and Suzuk Motors etc. The economy of the cty mostly depends on car manufacturng and export. The cty has an estmated populaton of 383, 69 (source: [2]). Fgure. Locaton of Toyohash Fgure. Locaton of Toyohash cty n Japan (source: Naohro et al., [2] (2005)) Methodology The underlyng approach of ths study s CGE model. CGE models (both smple and standard) prmarly rely on the basc assumptons of mcroeconomcs as ther foundatons. These models assume one representatve household, whch consumes goods, and two representatves frm, each of whch produces a certan goods. The household s supposed to maxmze ts utlty subect to ts budget constrants, whle the frms maxmze ther

4 08 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp profts subect to gven constrants on producton technology. The household and all the frms are prce takers, Hosoe et al., [6] (200). A CGE model descrbes the whole crcular flow of such market economy, whle mantanng accountng consstency both at the macro level of ndvdual actors, Abbnk, G. A. et al., [] (995). The model presented n ths paper s a statc CGE model (see Fgure 2), thus, there are no tme-related elements such as nvestment and savngs, and t s closed economy; that s, no nternatonal trade s ncluded. For constructng the model authors referred the lterature of Myata & Shbusawa [9] 2009; and Shoven & Whally [4] (992). As a common procedure for constructng the model nvolves the complaton of a database that descrbes the economy and s used to assgn values to the parameters of the mathematcal equatons. Ths process s called the calbraton of the model, Thurlow, J. [9] (2004). The most mportant database for CGE model calbraton s a SAM. However the I-O table and the SAM are not avalable n Toyohash cty, thus the I-O table was frstly estmated. The I-O table was estmated by breakng down 2005 Ach Prefecture s I-O table whch s the most recent table that s avalable. The orgnal Ach Prefecture s I-O table conssts of 40 ndustral sectors. Ths table s aggregated nto a 3 ndustral sectors table correspondng to the classfcaton of ndustral producton. Followng ths procedure, the 3 (see Table 2) sector table s broken down as Toyohash cty s table by applyng FRATAR method, and by usng several statstcs ncludng the natonal populaton census, agrcultural census, manufacturng census, and commerce census though the descrpton of the method s skpped. Table 2. Classfcaton of ndustres (source: [2]). ndustres ndustres. agrculture, forestry & fshery 7. electronc component 2. mnng 8. automoble 3. beverage & food 4. textle 9. arcraft 20.other transportaton equpment 5. pulp, paper & wooden 2. precson nstrument 6. chemcal 22. other manufactured 7. petroleum & coal 23. constructon 8. plastc 24. electrcty, gas & heat supply 9. ceramc 25. water supply & waste dsposal 0. other ceramc, stone & clay 26. commerce. ron & steel 27. fnance & nsuance 2. non-ferrous metal 28. reale state 3. metal product 29. transport 4. general machnery 30. nformaton & telecommuncaton 5. electrcal machnery 3. servce 6. nformaton & communcaton electronc equpments And developng SAM of Toyohash cty s an extenson of I-O table of ths cty. The estmated results are shown below (see Table 3). From the table, t can be seen that ndustres produce 3,52 bllon yen of commodtes and servces. However t s a characterstcs nature that the external sector s net demand for goods and servces produced n the study area shows 25,395 mllon yen, whch seems hgh. The populaton of the study area s small, thus the commodtes and servces must exports to the rest of the world. Lookng at the government sector, t obtans ts revenue of 567, 985 mllon yen from net ndrect tax, drect tax, and current transfer from the external sector. It s a specfc fact that the revenue from the external sector s large. In expendng sde, t s characterstc that the government savngs are small. In the household sector, household

5 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp obtan, 66,800 mllon yen of ncome, and then consume 9, 347 mllon of commodtes and servces. In the external sector, current transfers between the external sector and the government, and those between the external sector and households a large. Prevous nnovaton studes usng ths approach have been rooted n the feld of transportaton research analyss studyng the prospects for transportaton and energy systems dynamcs. Some of the recent studes have focused on the new generaton automoble wth technologcal nnovatons usng the smlar approach, Shbusawa & Sugawara [5] (20); Valere et al., [22] (200); Thomas, C. E. [7] (2009); Smon et al., [6] (202); and Thomas, C. E. S. [8] (2009). Other studes have focused the mportance of government polcy, nfrastructural change for spreadng EVs n Japan, Ahman, M. [2] (2006); Brown et al., [3] (200); and Wllett & Toru [23] (2000). The study of Tokunaga et al., [20] descrbes detals of EVs n Japan.

6 0 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Table 3. Socal accountng matrx of Toyohash cty n Japan. producton actvtes nsttutons producton factors economc sectors (n mllon yen) captal fnance external sector total producton actvtes nsttutons 3 ndustres government households captal labor 3 ndustres,298, , ,725 producton factors captal accumulaton ,666 external sector 25,395 government 5, , , ,985 households 0 62, , , ,65,66,800 captal 498, ,892 labor 922, ,29 970,404 37,492 4, , , ,24 32,465 52,645 49,882 80, ,25 3,52, ,985,66, , ,404 68, ,25 8,09,66 total 3,52,407

7 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Assumptons of the Model 3.. Man Assumptons Man assumptons made n our model are as follows: () 2005 Toyohash cty s economy s examned. Economc agents are households, frms n 3 ndustres, the government and the external sector. (2) 33 markets are consdered. They are 3 commodty markets, one labor market and one captal market. These are assumed to be perfectly compettve, and n equlbrum n Behavor of 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 labor and captal nputs (see Fgure 2). Constant returns to scale are assumed n the technology, cost mnmzaton problem can be wrtten as, mn 3 p x+ (+ tp )( wl + rk)( =,..., 3) () wth respect to X, L and K x x3 X = mn [ f ( L, K ),,..., ] (2) a a a f a ( a ) ( L, K ) A L K 0 3 (3) where 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 p : prce of commodty I x : ntermedate nput of ndustry 's product n ndustry, tp : net ndrect tax rate mposed on ndustry s product (ndrect tax rate - subsdy rate). Cost mnmzaton problem () to (3) yelds condtonal demands for ntermedate goods, labor, and captal n producton process X = a X (4) LD KD ( α ) r = [ ] α w = [ ( a w a ) r a α 0 A a X ( a ) 0 ] A X where LD : condtonal demand for labor n ndustry KD : condtonal captal demand n ndustry Zero proft condton s realzed n ndustres under perfect competton. 3 proft = p X p x (+ tp )[ w. LD + r. KD ] = 0 (7) (5) (6)

8 2 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp household utlty ndustral output Leonteff current goods CES lesure tme savng nvestment ntermedate nput 3 types of ndustres value added labor captal Leonteff Cobb-Douglas Fgure 2. Herarchcal structure of the CGE model Behavor of 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. 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= 3 p I I s realzed. Then the prce of nvestment good s expressed as p = 3 b p I. Ths can be regarded as the prce of savng good p s. Snce the captal returns after drect tax by a unt of captal necton s expressed by (-ty)(-k o )(-k r )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 )( k ) rδ / p (8) s o 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. 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. / v 2 ( v2 )/ v / v2 } v2 /( v2 ) maxg { β C + ( β ) F (9) C, F subect to p C+ ( ty)( l ) w F= ( ty) FI TrHO SH (0) o Solvng ths utlty maxmzaton problem, demand functons for composte consumpton, lesure tme, and labor supply are obtaned. β [( ty ) FI TrHO SH ] C = () v2 p Ω ( β )[( ty ) FI TrHO SH ] (2) F = v2 [( ty )( l o ) w] Ω LS = E F (3) ( v2 ) ( v2 ) Ω= β p + ( β )[( ty)( l ) w] ( 4 ) o

9 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp where LS : household labor supply 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 ) Substtutng composte consumpton () and lesure tme (2) nto (9), the prce ndex of the present good s derved as follows: v 2 v 2 } /( v2 ) p = { β p + ( β )[( ty)( l ) w] (5) G o Moreover composte consumpton good s dsaggregated nto produce goods through the maxmzaton of a Cobb-Douglas sub-utlty functon gven the household ncome and lesure tme. 3 γ max C C ( γ = ) (6) subect to 3 3 p C = ( ty) Y TrHO SH (7) where C : household consumpton good produced by ndustry I p : prce of good I 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 (8) C = [( ty ) Y TrHO SH ] ( =,,3) p The prce of composte consumpton s calculated as follows: p = 3 γ p γ 3.4. The Government The government sector n ths study conssts of the natonal and local governments actvtes n Toyohash cty. So the concept of the government corresponds to the defnton of SNA framework. 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. 3 3 p CG + TrGH+ TrGO+ SG= ty Y+ tp ( w LD + r KD ) TrOG (20) + where CG : government consumpton expendtures on commodty I TrGH: current transfers to households TrGO: current transfers to the external sector SG : government savngs TrOG : current transfers from the external sector (9)

10 4 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp 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. 3 3 p EX + TrOH+ TrOG+ KI+ LI+ SO= p EM + TrHO+ TrGO+ KIO LIO (2) + where EX : export of commodty I, EM : mport of commodty I, SO: savngs of the external sector (=-natonal current surplus) LIO : labor ncome transfers to the external sector (= l o w LS ) KIO: property ncome transfers to the external sector (= k 0 r KS) 3.6. Balance of Investment and Savng Household, government, area department`s savngs, the total consumpton of fxed captal, whch determnes the total nvestment. 3 3 p I = SH + SG + SO + DR (22) where I : demand for commodty by other nvestments, DR : consumpton of fxed captal amount of ndustry 3.7. Prces of Commodtes Cost conssts of the followng s derved from the Zero proft condton of the ndustry. p X p x + (+ tp )[ w LD+ r KD] (23) = 3 Gven a wage and a captal return rate, we can formally calculate commodty prces as follows: P= ( I A ) [(+ tp )( wld. + r kd )] (24) 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 3.8. Dervaton of Equlbrum The equlbrum condton n the model can be summarzed as follows, X Commodty market X a3 3 a = a 3 X a 33 X Labor market LS = 3 = LD Captal market KS = 3 = KD 3 C + C 3 CG + CG 3 I + I 3 EX + EX 3 EM EM 3 (25) (26) (27)

11 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Parameter Settng and Smulaton Cases 4.. 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 parameters n the utlty functon, estmaton of them s made n a standard way wth results shown n Table 4 though the descrpton of the estmaton method s skpped as well. Table 4. Utlty functon parameter. share parameter current good future good elastcty of substtuton between current and future goods.836 composte comsumpton lesure elastcty of substtuton between composte consumpton and lesure tme Smulaton Cases In ths secton, two cases are smulated and they are as follows: () Busness as usual case (Base case) and (2) Case (where 00% BEVs 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 GVs. Case assumes that the automoble ndustry produces 00% BEVs. The dfference between the two cases s nput coeffcents n IO table of Toyohash cty. The smulaton s conducted by changng the nput coeffcent of GVs and BEVs (see Table 5). Our man source for the nput coeffcent was the work of Japan Energy Economcs Research Insttute [8] (2006), where modeled the demand of nput coeffcent n the Japan market.

12 6 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Table 5. Input coeffcent of gasolne and battery-based electrc vehcles. ndustres. agrculture,forestry & fshery 2. mnng 3. beverages & 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. reale state 29. transport 30. nformaton & telecommuncatons 3. servces gasolne vehcles battery-based electrc vehcles Smulaton Results In ths secton we present the smulaton results referrng to some mportant economc varables. 5.. Amount of Industral Producton Changes n ndustral outputs are shown n Fgures 3 and 4. After BEVs beng put nto operaton, the total ndustral producton 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 BEVs. Increases n outputs are also found n mnng (0.3%), constructon (9.4%), precson machne (7.0%), general machne (5.6%)

13 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp and electrcty, gas and heat supply (4.8%). The ncrease n output of non-ferrous metals mght be a lttle large, however the batteres used n BEVs should be much produced demandng a lot of non-ferrous metals. Ths result has also been confrmed by the IO analyss of Japan s economy, and can be concluded as that t s qualtatvely plausble. 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 BEVs producton. The output of automoble ndustry shows a decrease of -9.3% whch s nterestng. The reason s attrbuted to the fact of the less number of parts n BEVs. That s, the economc repercusson of producng BEVs on other relatng ndustres becomes less as compared wth GVs. Producng BEVs 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. Fgure 3. Amount of ndustral producton.

14 8 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Fgure 4. Change rate of ndustral outputs Cty GDP The cty GDP s defned as gross value added n the cty. Value added rates are adusted n order that the sums of coeffcents n the column n the automoble ndustry become the unty. As shown n Fgures 5 and 6, the manner of changes n the cty s GDP by sector s smlar to that of ndustral outputs. It s nterestng to see an ncrease n 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 BEVs. Thus ncreases n wage rate and/or n frms proft are observed n BEVs producton resultng n stmulatng to household consumpton expendtures as a general equlbrum effect, whle the repercusson effect of GVs 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%. Fgure 5. Cty GDP.

15 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Fgure 6. Change rate of cty GDP Labor Demand Lookng at changes n labor demands by sector n Fgures 7 and 8, t can be seen 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 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. Fgure 7. Labor demand n ndustres.

16 20 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Fgure 8. Change rate of labor demand n ndustres 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 BEVs. Lookng at changes n captal demand by ndustry n Fgures 9 and 0, 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 9. Captal demand.

17 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Fgure 0. Change rate of captal demand Commodty Prces Commodty prces are determned by factor prces. 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 BEVs 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 and 2, 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 the real wage rate leadng to welfare loss. Fgure. Commodty prce.

18 22 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Fgure 2. Change rate of commodty prce Other Varables Let us look at Fgures 3 and 4 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 3. 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, whch s

19 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp ν ν / ν EV = e( pg, ph, u ) e( pg, ph, u0) = ( u u0 )[ αp G + ( α ) ph ] where e(p G, p H, u) - expendture functon, p G and p H - prces of present and future goods n the base case, u 0 and u - utlty levels before and after the BEVs producton Fgure 4. Change rate of other varable. 6. Concludng Remarks In ths paper, we have developed a CGE model to nvestgate the economc repercussons of BEVs producton. We also have focused on a new ndustral structure to cope wth the change n the BEVs producton system of Toyohash cty n Japan. Moreover, we have ntroduced an I-O table and a SAM for Toyohash cty n ths study. By employng the CGE model, the two numercal smulatons have been mplemented. From the smulaton results, some nterestng conclusons have been obtaned. For example, the output of automoble ndustry has shown a decrease of -9.3% though the labor demand n that ndustry depcts a rse of 4.3%. 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. Moreover, t s nterestng to see an ncrease n 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 BEVs. Thus ncreases n wage rate and/or n frms proft are observed n BEVs producton resultng n stmulatng to household consumpton expendtures as a general equlbrum effect, whle the repercusson effect of GVs manufacturng goes to automoble ndustry tself. That s, the economc mpact of producng BEVs on other relatng ndustres becomes less as compared wth GVs. Producng BEVs once gve a negatve mpact on Toyohash s economy. Therefore t suggests the necessty of transformaton of the current ndustral to compensate the negatve mpact. At ths pont, ths study hghlghts on a new ndustral structure to cope wth a change of producton system. Partcularly t s suggested to promote ndustres such as non-ferrous metal (ncrease rate of 74.%) manufacturng where a large economc mpact appears and to attempt to ncorporate such mpact nto Toyohash cty s economy. The reason s that a lot of non-ferrous metals are necessary for producng batteres used n BEVs. The ncrease n output of non-ferrous metals mght be a lttle large, however the batteres used n BEVs should be much produced demandng a lot of non-ferrous metals. Ths result has also been confrmed by the IO analyss of Japan s economy, and can be concluded as that t

20 24 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp s qualtatvely plausble. Thus t s clamed that ths study confnes tself to explan the features that have bearng on the development of BEVs. Moreover, ths paper focused on the producton process of BEVs, however soco-economc mpacts of spread of BEVs seem to be also very mportant. In ths paper we have not consdered the mportance of subsdes, whlst subsdes may be requred to overcome the ntal prce dfferental, BEVs wll be expensve untl a market emerges. It can be expected that spread of BEVs would greatly reduce the CO 2 emssons, however t s also strongly depends on nternalzng electrcty generated from renewable sources of energes, lke solar or/and wnd. In addton, lately securty n electrcty generaton s a great concern as Japan has been experencng nuclear crss after the Tohoku earthquake and tsunam ht n March 20. Japan has one of the lowest energy ntenstes (energy- use per unt of GNP) n the ndustralzed world, but ts aggregate energy-use s stll rsng. Moreover, new technologes lke smart grd must be nternalzed n our model to stablze demand and supply of electrcty generated from renewable sources of energes. Therefore, our future study wll nclude the popularzaton of BEVs, and ntroduce a Battery-based Electrc Vehcle socety wth renewable energes and smart grd technology n Toyohash cty n Japan. References [] Abbnk, G. A. et al., A Sam-CGE Demonstraton Model For Indonesa: Statc and Dynamc Specfcatons and Experments, Internatonal Economc Journal, Vol. 9, Number [2] Ahman, M., Government Polcy and the development of electrc vehcles n Japan, Elsever, Energy Polcy, Vol. 34, 2006, pp < [3] Brown, S., Pyke, D. & Steenhof, P., Electrc vehcles: The role and mportance of standards n an emergng market Elsever, Energy Polcy, Vol. 38, 200, pp [4] GGIOJ (Greenhouse Gas Inventory Offce of Japan) Natonal GHGs Inventory Report of Japan, < [5] Houghton, J.T. et al., Clmate Change 995 -The Scence of Clmate Change., The Cambrdge Unversty Press, 996. [6] Hosoe, N. et al., Textbook of Computable General Equlbrum Modelng, Programmng and Smulaton, Palgrave Macmllan, New York [7] IEA (Internatonal Energy Agency), World Energy Outlook Pars, France. [8] Japan Energy Economcs Research Insttute, A Study on Technologcal Informaton for the Comprhesve Economy-Energy-Envronmental Analyss, 2006, pp [9] Myata, Y. & Shbusawa, H., Does the ncrease n the Populaton Prevent a Sustanable Growth of an Envron mtally Frendly Cty?- A comparson of Case of Decreasng and Increasng Populatons of Obhro Metropol tan Area, Japan by an Intertemporal CGE-Modelng Approach -. Interdscplnary Informaton Scences. Vol. 4. No., 2009, pp [0] MOE (Mnstry of Envronment, Japan), Natonal Greenhouse Gas Inventory Report of Japan. Natonal [] MOE (Mnstry of Envronment, Japan), Kankyo Hakusho (Envronmental whte paper of Japan), 997. [n Japanese]. [2] Naohro, G., et al., Envronmental Management System Based on Materal Flow Analyss to Establsh and Mantan Eco Town, J. Ind. Eng. Chem., Vol., No. 6. pp < PDF/ JIEC/IE/IE pdf> [3] Shbusawa, H. & Myata, Y., An Evaluaton of the Compact Cty: A Dynamc Urban Computable General Equlbrum Model. 48th European Congress of the RSAI. 2008, Lverpool. UK. [4] Shoven, J. B., & Whalley, J., Applyng General Equlbrum. Cambrdge survey of Economc Lterature, Cambrdge Unversty Press, [5] Shbusawa, H. & Sugawara, T., Evaluatng the Economc Impacts of the Producton of New Generton Automobles wth Technologcal Innovatons,

21 Khanam S. and Myata Y., Regonal Scence Inqury Journal, Vol. IV, (3), 202, Specal Issue, pp Studes n Regonal Scence. Japan secton of Rgonal Scence Assocaton Internatonal (JSRSAI). Vol. 4. No Pp (n Japanese). [6] Smon, S. et al., Factors affectng future demand for electrc vehcles: A model based study ransport Polcy. Vol. 20: Elsever, 202, < > [7] Thomas, C. E., Fuel cell and battery electrc vehcles compared, Elsever, Internatonal Journal of Hydrogen Energy, 34, 2009, pp < [8] Thomas, C. E. S., Transportaton optons n a carbon-constraned world: Hybrds, plug-n hybrds, bofuels, fuel cell electrc vehcles, and battery electrc Vehcles, Elsever, Internatonal Journal of Hydrogen Energy. Vol. 34. Elsever, 2009, pp < [9] Thurlow, J. A dynamc computable general equlbrum (CGE) model for South Afrca extendng the Statc IFPRI Model. Trade and Industral Polcy Strateges (TIPS), Workng [20] Tokunaga, S. et al., Model Analyss of Envronmental polces for Auto Mobles, Bunchndo, 2008 (n Japanese). [2] Toyohash cty HP: From: [22] Valere, J. K., Prospects for plug-n hybrd electrc vehcles n the Unted States and Japan: A general equlbrum Analyss, Elsever, Transportaton Research, Part A 44, 200, pp < [23] Wllett, K. & Toru, K., Electrc-drve vehcles for peak power n Japan, Elsever, Energy Polcy,Vol. 28, 2000, pp. 9-8.