SGM

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SGM
P.R. Shukla
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Second Generation Model
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Top-Down Economic Models

• Project baseline carbon emissions over time for a
  country or group of countries
• Find the least-cost way to meet any particular
  emissions constraint
• Provide a measure of the carbon price, in dollars
  per metric ton
• Provide some measure of the overall cost of
  meeting an emissions target

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Key SGM Characteristics

• Computable General Equilibrium
• 12 Global Regions (Developed in International
  Collaborations)
• Multiple Greenhouse Gases
• Internally Generated Demographics
• Vintaged Capital Stocks
• Explicit Energy Technology
• Land Resource Constraints

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SGM 2000 Structure and Sectors
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Computable General Equilibrium

• Based on Economic Principles.
• All economic activities are included in some
  sector of the model.
• Market equilibrium -- ALL markets must clear
  simultaneously.
• Maximization Behavior -- consumers, utility
  producers, net worth.

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SGM Regions

• Annex I
• United States
• Canada
• Western Europe
• Japan
• Australia
• Former Soviet Union
• Eastern Europe

• Non Annex I
• China
• India
• Middle East
• Mexico
• South Korea
• Rest of World

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Multiple Greenhouse Gases

• CO2
• CH4
• CO
• N2O

• NOx
• SOx
• NMHC

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Internal Demographics

• Age structure gender of the population is
  developed internally using
• fertility rates
• survival rates
• net migration rates
• Labor force participation rates can be age
  gender specific.

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SGM Inputs Outputs

• Factors of Production
• Capital,
• Labor,
• Land,
• Agriculture,
• Energy,
• Materials.

• Model Outputs
• Agriculture,
• Energy,
• Materials,
• Savings,
• Consumption
• GDP.

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Energy Focus

• 8 Energy Sectors
• Resources and Reserves of Energy Resources
• Vintaged Energy Using Technologies

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SGM Is Part of GCAM

• SGM is part of the Global Change Assessment
  Modeling (GCAM) System, an integrated assessment
  model
• computes concentrations of greenhouse bases such
  as CO2,
• can compute DT and sea level rise.

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Production Decisions

• Production occurs out of existing capacity and
  its vintage
• limited by previous investments,
• then current technologies
• Retirement of old capacity occurs when
• Cannot cover operating expenses
• Old age -- fixed life, or
• Policy -- forced retirement

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Production Functions

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• Technical coefficients control change in
  input-output ratios over time.
• Energy coefficient is similar to AEEI (Autonomous
  Energy Efficiency Improvement).

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New Capacity

• Investment is based on expected profitability.
• available technology
• price expectations,
• policy expectations
• Price Policy Expectations can be either forward
  or backward looking.

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Investment

• Capital market balances supply and demand of
  loanable funds.
• Investment resources distributed among
  investments with positive expected net
  profitability
• no resources flow to expected losers
• the higher the expected rate of return, the
  greater the share of the investment pool

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Energy Production

• Energy production out of reserves.
• Additions to reserves from the resource base.
• additions depend on expected profitability
• resource availability.

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Energy Technology

• Hierarchical model.
• sectors,
• sub-sectors,
• technologies.
• Explicit energy technologies can be introduced
  into the model.
• e.g. natural gas combined cycle turbines for
  power generation.

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Issues the SGM Can Address

• Assessing impacts of greenhouse gas emissions
  mitigation policies on GDP, consumption and
  energy.
• Value of emissions rights trading.
• Value of when flexibility.
• Relative costs and benefits to regions of the
  world of alternative protocol formulations.

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SGM Strengths

• Built specifically for climate policy analysis.
• Multiple greenhouse gases.
• Part of an Integrated Assessment model -- e.g.
  can compute CO2 concentrations or DT.
• General equilibrium -- all markets clear.
• Detailed energy supply sector.
• Can be run in alternative foresight modes.
• Internal demographics.
• International Collaborations.

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SGM Limitations

• Not a business cycle model -- does not estimate
  inflation or unemployment policy impacts.
• Limited energy end-use detail.
• Provides no sub-national disaggregation for the
  United States.

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SGM Data Requirements
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Model Integration
Top-Down Economic Model (integration tool)
international trade
Region A
Region B
Bottom-Up
Ecosystem
Energy Technology
Impacts
Climate Scenarios
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India Results
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Real GNP and components
Reference Scenario
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Energy Consumption
Reference Scenario
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Electricity by sub-sector
Reference Scenario
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CO2 Emissions
Reference Scenario
1000
900
800
700
600
Teragrams carbon
500
400
300
200
100
0
1990
1995
2000
2005
2010
2015
2020
2025
2030
Base
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Policy scenarios

• Alternate growth scenarios
• Low 5
• High 7
• Alternate tax scenarios
• Fixed tax 25, 50, 100 per tC
• Increasing tax

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Policy scenarios

• Advanced technology scenarios
• High Solar
• Medium Solar with 5 tax
• Medium Solar with 25 tax

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Real GNP
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Energy consumption
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Energy Mix Low Growth
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Energy Mix High Growth
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Results
Tax Scenarios
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Energy Consumption
Tax Scenarios
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Energy Consumption Fuel-wise
Tax Scenarios
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Energy Consumption 100 Tax
Compare Ref.
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CO2 Emissions
Tax Scenarios
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Change in GNP over base case
Tax Scenarios
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Change in GNP over base case
Tax Scenarios
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CO2 Emissions Cumulative
Tax Scenarios
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Results
Advance Technology Scenarios
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CO2 Emissions
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CO2 Emissions
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Solar in Electricity
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Change in GNP over base case
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Change in GNP over base case