Task 1: Energy Models in China

1. B A S I C B A S C I Task 1:Energy Models in China Fei TENG Global Climate Change Institute, Tsinghua University

2. C B A S I Outline • The Time Line of Energy Models • Overview of Bottom-up Models • Overview of Top-down Models • Major Findings from The Task

3. C B A S I Time Line of Energy Models Bottom-up MARKAL IPAC LEAP 3E 1980 1990 2000 2005 Top-down: Input-Output YE’s Liang’s PRCGEM DRCSC’ HE CNAGE TEDCGE IPAC-SGM Computable General Equilibrium

4. C B A S I Overview of Bottom-up Models

5. C B A S I MARKAL Model • Developed by BNL and KFA, a multi-periods LP model • Minimize the cost of satisfying the energy demand • China MARKAL-MACRO Model, Base Year: 1995. • Period covered: 1995-2050, every 5 years. • Sectors: 5 Sectors, Agriculture, Industry, Residence, Transport and Service, 30 sub-sectors in detail. • Technology: 20 energy carriers; 36 reference technologies and 35 advanced technologies. • Applications: • INET: impacts of emission reductions on China’s GDP with MARKAL-MACRO Model; Beijing’s energy supply scenarios and possible impacts; • SHESRI: responses of the energy system to energy structure adjustment policies in Shanghai

6. C B A S I MARKAL Model • BAU: 2000-2050 • Population: 1.294 billion for 2000; 1.495 billion for 2020; 1.56 billion for 2030; 15.75 billion for 2050. • Economy Growth: 1074.6 billion $ for 2000; 3710.5 billion $ for 2020; 6338.1 billion $ for 2030 (1995 Price) • Economy Structure. • Energy Service: 5 sectors. • Resource constrain for primary energy: e.g. Coal, 1823Mt for 2010, 2512Mt for 2030. • Energy Technologies: Reference technologies + Advanced technologies (CCS + polygeneration)

7. MARKAL Model • Scenarios: • ADV: considering advanced technologies. • C20P, C30P and C40P: reduce emission from 2020. 2030 and 2040. • N1 and N2: constrain on Nuclear capacity. • Four reduction scenarios: 11%, 23%, 27.4% and 46.4%.

8. LEAP Model • Base Year: 1999. • Period covered: 1999-2030. • Sectors: 5 Sectors, Agriculture, Industry, Residence, Transport and Service. • Scenario-based model describing the production, transformation and consumption of energy • No linkage between energy price and the economy • Activity-based energy demand forecasting • Used for environmental impact analysis in conjunction with Technology and Environmental Database • Application • NDRC Energy Research Institute (ERI), INET and SHESRI • ERI: Sustainable Energy Development Scenarios in China • INET: China’s energy system under future Northeast Asia cooperation scenario

9. C B A S I LEAP Model

10. AIM Model • Detailed technical assessment model for evaluation of technical and GHG mitigation policies • Suitable for short- and medium-term analysis • Could be used to evaluate the effects of one single or several policies • Application: ERI • Insufficiencies: • No linkage with economic model and exogenous setting of energy demand • Social and other barriers not considered • Not able to cover all technologies

11. C B A S I Economy-Energy-Environment（3E）Model • Three components: macroeconomic model (MEM), end use forecasting model (EDFM), energy system optimization model (ESOM) • MEM: to estimate the long-term economic development • EDFM: to forecast end use energy demand with energy intensity index, elastic coefficient method and econometrics method • ESOM: to optimize the energy system based on energy flow networks

12. Economy-Energy-Environment（3E）Model • Developed by INET, Tsinghua • Application: • China’s CO2 abatement cost during 2015-2030 • Relationship between China’s CO2 abatement cost and energy strategies • Responses of energy system to the mitigation policies • Insufficiencies • Outputs of ESOM are technology-based, not sector-based • MEM model is a macro-econometric, not suitable for long-run forecasting • Open-Loop, no feed back

13. Major Findings from Bottom-up Models • Difficult to compare the result from different models because of different scenarios setting and period covered. • A set of scenario should be developed • Social economic scenario: population, GDP etc. • Energy Service scenario: agriculture, industry, household, commerce and transport.

14. C B A S I Overview of Top-down Models

15. C B A S I YE’s IO Model • Developed by INET • Multi-sectors, multi-period nonlinear input-output model • Maximize the aggregated consumer utility while only the utility caused by consumption is considered • There GHG emission sources considered: combustion of fossil fuel, production process and some by-products • Application: impacts of different mitigation scenarios on the GDP

16. C B A S I Liang’s IO Model • Application • China’s energy demand and GDP energy intensity during 2010-2020 • Impacts of different socio-economic factors on energy demand and energy intensity • Insufficiencies • RAS adjustment method no suitable for a fast developing economy like China

17. C B A S I Comparison between IO models

18. C B A S I HE Model • A static model with 9 sectors • Impacts of carbon tax on the economy • Carbon tax imposed on the production and import of fossil energy, and thus no consideration of CO2 emission from other sources • China’s CDM potential: adjustment of economic structure, technological progress, adjustment of energy structure and energy efficiency improvement • 1997 I-O table

19. C B A S I PRCGEM • Large-scale model with 118 sectors and 30 areas • Mainly impacts of trade liberalization policies, but also of environmental policies • Carbon tax imposed on the consumption of fossil fuel, and thus no consideration of CO2 emission from other sources • Long-term and short-term mitigation cost, with different assumptions

20. C B A S I DRCSC’s CGE Model • Multi-sector dynamic model • Application • the future trend of industry structure in China • the environment impact of these trends • impact of pollution limitation policy on the economic growth and industrial structure • environment impact of trade liberalization and globalization in China • No consideration of CO2 mitigation

21. TEDCGE Model • 10 sectors • Carbon tax on fossil fuel production and import, based on adjusted factors • Emission from industrial process also considered • Impacts of carbon tax under four scenarios: • Only carbon tax • Carbon tax and whole transfer payment • Carbon tax and 50% transfer payment • Carbon tax and tax reduction in other areas • China’s CO2 mitigation potential and cost

22. C B A S I CNAGE Model • Developed jointly by Chinese and Norwegian Statistic Bureaus • Impacts of carbon tax of two levels on the short- and long-term GDP and productions of different sectors

23. C B A S I IPAC-SGM Model • Developed jointly by ERI and US Pacific Northwest Laboratory • 20 sectors with 9 energy production and 11 energy consumptions sectors • Application • China’s energy scenarios till 2050 • Impacts of carbon tax, technology investment and technology cooperation on GHG emissions, the economy and different sectors

24. C B A S I Comparing CGE models

25. Comparing CGE Models

26. C B A S I Major Findings from CGE models • Elasticity estimation to reduce uncertainties • Model structure: competitive market • Detailed expression of technology in the models • Treatment of non-commercial energies

27. C B A S I Suggestion • Strengthened fundamental econometric research to complete the data basis and reduce the impacts of estimated parameters • More comprehensive welfare analysis for different consumer groups • More attention given to specific market conditions and price regulation, and thus some structural CGE models could be the future direction • Non-commercial energies be considered • More detailed description of technologies as technology plays an essential role in making relevant decisions

28. Future Works • Compare not only the model structure but also the scenarios. • Reorganize the material to account for different audiences.

29. C B A S I Thank for your attention !