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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


GE modelling at the OECD in historical perspective










1997 2000





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
  • Rob Dellink
  • OECD Environment Directorate
  • +33 (0) 1 45 24 19 53