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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. 2. GE modelling at the OECD in historical perspective. JOBS. ENV-Linkages. Linkages. WALRAS. GREEN.

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introducing land use in oecd s env linkages model

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

ge modelling at the oecd in historical perspective

2

GE modelling at the OECD in historical perspective

JOBS

ENV-Linkages

Linkages

WALRAS

GREEN

GREEN

Time

2004

2011

1997 2000

1987

1990

1992

MIT-EPPA

the env linkages model
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)
sectoral aggregation
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
describing economic activity production
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
data sources
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
creating a baseline projection
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
drivers of gdp growth
Drivers of GDP growth

Source: ENV-Linkages model projection

projections for emissions of co 2 from fossil fuel combustion
Projections for emissions of CO2 from fossil fuel combustion

Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE

approach to introducing land use ongoing
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
land use in agriculture
Land use in agriculture

Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE

applications with the extended model
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
contact
Contact
  • Rob Dellink
  • OECD Environment Directorate
  • rob.dellink@oecd.org
  • +33 (0) 1 45 24 19 53