Introducing land use in OECD’s ENV-Linkages model Rob Dellink OECD Environment Directorate 9 February 2011, OECD Expert Meeting on “Climate change, Agriculture and Land use”,
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Introducing land use in OECD’s ENV-Linkages model Rob Dellink OECD Environment Directorate 9 February 2011, OECD Expert Meeting on “Climate change, Agriculture and Land use”, Paris Organisation for Economic Co-operation and Development (OECD) 1 2 GE modelling at the OECD in historical perspective JOBS ENV-Linkages Linkages WALRAS GREEN GREEN Time 1987 1990 1992 1997 2000 2004 2011 MIT-EPPA Organisation for Economic Co-operation and Development (OECD) 2 The ENV-Linkages model • Computable General Equilibrium (CGE) model • Full description of economies • Simultaneous equilibrium on all markets • Structural trends, no business cycles • All economic activity is part of a closed, linked system • World divided into 29 regions (15 for modelling analysis) • Each economy divided into 26 sectors (with focus on energy) • • Recursive-dynamic: horizon 2005-2050; vintages of capital Link from economy to environment • Greenhouse gas emissions linked to economic activity • Damages from climate change not assessed: model only assesses the costs of policies, without valuing their environmental benefits • Working on feedback link from climate to economy (impacts) Organisation for Economic Co-operation and Development (OECD) 3 Regional aggregation Aggregation ENV-L: 15 Regions Region ID Label CAN JPK OCE RUS USA WEU Canada Japan & Korea Oceania Russia + USA European Union & EFTA RAN Rest of Annex I BRA CHN IDN IND MEA MEX ZAF ROW Brazil China + Indonesia India Middle East & Northern Africa Mexico South Africa Rest of the World Aggregation ENV-L: 29 Regions Region ID Label CAN JPN OCE RUS USA E15 ENO UKR TUR BRA CHN IDN IND MEA MEX ZAF RCA TAN WAF SEA Canada Japan Oceania Russia + USA European Union 15 EU countries non OECD Ukraine + Turkey Brazil China + Indonesia India Middle East Mexico South Africa Rest Central America Asia-Stan Western Africa Southeastern Asia Organisation for Economic Co-operation and Development (OECD) Region ID Label KOR Korea EOC EFT RCE Rest of EU OECD EFTA Rest of Central Europe NAF Northern Africa RSA SAF EAF STA Rest South America Rest of Southern Africa Eastern Africa Rest of South Asia 4 Sectoral aggregation • 5 agriculture related sectors • Rice cultivation, other crops, livestock, forestry, fisheries • 4 primary energy related sectors • Crude oil, coal, gas, petroleum refineries • 5 electricity related technologies (‘sectors’) • Fossil fuel, hydro/geothermal, nuclear, solar/wind, biomass/waste • 6 energy intensive industries • Non-ferrous metals, iron & steel, chemicals, fabricated metal products, paper and paper products, non-metallic minerals • 6 other sectors • Food products, other mining, other manufacturing, transport services, services, construction & dwellings Organisation for Economic Co-operation and Development (OECD) 5 Describing economic activity: production • Smooth production functions describe how producers can choose among different technologies • Multi-level constant elasticity of substitution (CES) functions • Works well because sectors are aggregated across many different firms • Adjustments of the generic production function or specific sectors • • • • • • Land input in Agriculture and Forestry sectors Some other sectors have ‘natural resource’ (capacity constraints) Fertilizer in crops production Feed in livestock sector Primary energy sources in fossil fuel electricity Alternative technologies for electricity are almost perfect substitutes Organisation for Economic Co-operation and Development (OECD) 6 Data sources • Socio-economic data • GTAP 7.1 database; UN Population projections; World Bank, IMF macro projections • Environmental data • CO2 emissions harmonized with IEA • Agricultural emissions: CO2 from energy use; CH4 from rice cultivation, enteric fermentation and manure; N2O from manure and soils – only CH4 from rice linked to land use, others to production level • Projections for non-CO2 GHG and LULUCF emissions (CO2) in the process of harmonization with IMAGE • Land use data • FAO for historic land use cover and deforestation rates • IMAGE for land cover projections and conversion (deforestation, afforestation) emission/sink rates • OSIRIS REDD marginal abatement cost curves Organisation for Economic Co-operation and Development (OECD) 7 Creating a baseline projection • Projecting future trends in socio-economic developments until 2050 • Not a prediction of what will happen! • Be humble: we know very little about long-term future economic activity • Based on a “conditional convergence” methodology • Based on recent growth theory • Countries further from their potential are expected to grow faster • No direct convergence in levels of e.g. GDP, but convergence in drivers of growth: total factor productivity, labour productivity • Conditionally converging drivers plus exogenous trends in e.g. population create an internally consistent set of future projections • Methodology has been discussed and accepted at EPOC’s ad-hoc expert meeting on the Outlook in November Organisation for Economic Co-operation and Development (OECD) 8 Drivers of GDP growth 6 9 7 8 6 5 2010 2015 2015 --2030 Average 2030 2050 Other Otherfactor factorsupply supply Other Otherfactor factorproductivity productivity 7 5 4 6 4 3 5 3 Other Otherfactor factorallocation allocation Capital Capitalsupply supply Capital Capitalproductivity productivity 4 2 2 3 1 1 2 Capital Capitalallocation allocation Labour Laboursupply supply Labour supply 0 0 1 Labour Labourproductivity productivity Labour productivity -1 -1 0 ROW ROW ZAF ZAF MEX MEX MEA MEA IND IND IDN IDN CHN CHN BRA BRA RAN RAN WEU WEU USA USA RUS RUS OCE OCE JPK JPK -2 -1 -2 CAN CAN Labour Labourallocation allocation Labour allocation Source: ENV-Linkages model projection Organisation for Economic Co-operation and Development (OECD) 9 Projections for emissions of CO2 from fossil fuel combustion GtCO2e 60 ENV-Linkages (current (current ENV-Linkages baseline) baseline) 55 50 IEA-ETP 2010 2010 IEA-ETP 45 40 IEA-WEO 2010 2010 IEA-WEO 35 30 OECD Environmental Environmental OECD Outlook 2008 2008 Outlook 25 IPCC IPCC 4AR 4AR Range Range 2048 2050 2044 2046 2040 2042 2036 2038 2032 2034 2028 2030 2024 2026 2022 2020 2018 2014 2016 2010 2012 20 Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE Organisation for Economic Co-operation and Development (OECD) 10 Approach to introducing land use (ongoing) • Step by step • First focus on CO2 emissions from deforestation and afforestation • Later expand agricultural sector and include bioenergy • Modelling land use change • Multi-level CET structure for governing land use conversion • Supply elasticity for managed land endogenously depends on land availability (so-called land supply curve) • Distinguish intensive vs. extensive margin response to climate policy • Introducing carbon pricing policies • No emissions associated with land that stays in same category (apart from agricultural GHG emissions) • Carbon subsidy for afforestation • Carbon tax for deforestation Organisation for Economic Co-operation and Development (OECD) 11 Nesting structure land use Rice Grains Sugar Oilseeds Other crops Livestock Crops Forestry Agriculture Managed land Organisation for Economic Co-operation and Development (OECD) Unmanaged land 12 1800 1600 1400 1200 1000 800 600 400 200 0 2004 Resrt of America Rest of Africa Rest of Asia Rest of Annex I European Union & … South Africa Middle East Russia + Mexico USA Canada India Indonesia Japan & Korea China + Oceania 2050 Brazil mln ha Land use in agriculture Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE Organisation for Economic Co-operation and Development (OECD) 13 Applications with the extended model • OECD Environmental Outlook • Wide range of policy simulations focus on Climate change, Biodiversity, Water, and Health & Environment • Collaboration with IMAGE suite of models • Economic analysis of the Copenhagen Accord / Cancun Decisions emission pledges • Explicit treatment of REDD+ for non-Annex I parties • Explicit treatment of land accounting rules rules for Annex I parties • Foreseen future policy analyses (to be determined) • Energy subsidy reform: fossil fuels, bioenergy, renewables • Integrated climate change and biodiversity policies • Possibilities for REDD+ in fragmented carbon markets Organisation for Economic Co-operation and Development (OECD) 14 Contact Rob Dellink OECD Environment Directorate [email protected] +33 (0) 1 45 24 19 53 Organisation for Economic Co-operation and Development (OECD) 15