Transitions towards a F4 society A three year modelling program - - PowerPoint PPT Presentation

Jean-Charles Hourcade, Renaud Crassous, Olivier Sassi, Frederic Ghersi, Sandrine Mathy, Vincent Gitz, Henri Weitzman

Transitions towards a F4 society A three year modelling program supported by IDDRI

A specific institutional setting

• IDDRI: a Research Foundation funded by French Ministries (foreign

affairs, finance, environment, research, equipment) and 15 enterprises

• EPE: Enterprises for the Environment; a consortium of 22 energy

intensive entreprises including the cement,steel and non ferrous industry

• Energy enterprises including EDF (Electricité de France) and Total

(oil company)

• The CIRED (Cnrs, Ehess, Enpc, Engref, Meteo – France, Cirad)
• The LEPII (Cnrs and University of Grenoble)

A program based on a shared dissatisfaction between modellers and industry

• A F4 objective cannot be reached without technological

breakthrough and deep changes in final demand

• This breakthrough will not been achieved unless industry sees the F4
• bjective as a mobilizing utopia instead of a pure constraint
• To help policy discussions the current state of the art in long term

modelling has to be improved in the following directions:

– The consistency of the dialogue between macro-economists and sector-based expertize – To scrutinize the transformation of the final demand – Transition mechanisms ‘instead of steady state economies’ – Macroeconomic parameters in a world economy under structural disequilibrium – Sensitivity to controversial judgments

SRESS : the trap of the combinatory explosion?

Source : IIASA, Nakicenovic

Parameters of the KAYA entity are in fact linked by endogenous interplays

CSM – Paris – 24 mars 2005

2 2

CO CO

E GDP Energy E POP POP GDP Energy = ⋅ ⋅ ⋅

Two Main Policy Questions

• For minimizing the costs a F4 objective what is the relative role of:

– The decarbonisation of energy supply (fuel switching and minimisation

• n the conversion losses

– The end – use energy efficiency – Structural changes in final demand of goods and services (dematerialisation of growth patterns) – Macroeconomic parameters in opened economies

• What ‘climate regime’ is capable to incite

– Industry to provide responses to the first three challenges (technologies, products) – Goverments to provide the most favorable macroeconomic context and to mobilize –non carbon price only - policies

A scientific strategy with four components ….

• An ‘novel’ modelling framework (Imaclim – Poles)
• A representation of alternative development styles
• A specific scenario approach
• A heuristic approach with a permanent dialogue with

industry and other stakeholders

… and relying on two pre-existing models

Consommations Technologies Géographie humaine

Prospective énergétique Modèle POLES (LEPII-EPE)

• Horizon 2050
• Monde en 38 zones
• 24 productions d’électricité
• 11 usages finaux de l’énergie
• Marchés mondiaux endogènes
• 6 gaz à effet de serre
• Etalement urbain
• Evolution des modes de travail

et de loisir

• Inerties des infrastructures
• Choix modaux

Matrice Input Output Revenus Investissement Emploi Fiscalité Marchés internationaux

Prospective macroéconomique Modèle IMACLIM (CIRED)

effet d’éviction, spillovers, progrès technique induit propagation des signaux prix Réformes écofiscales, double dividende ?

Mise en cohérence quantités/prix Calibrage des fonctions comportementales

(demandes de biens et de facteurs)

EPE - 6 décembre 2004

What would we like to represent?

Démographie Productivité Commerce international Flux de capitaux Coût des technologies Stock de ressources fossiles Progrès technique Stock d'équipements Parc automobile Infrastructures Development patterns Energy parameters Growth engine

Main modelling principles

• An hybrid modelling structure in physical and money flows in
• rder to secure the dialogue with sector - based expertise and

make explicit

– the assumptions governing the dematerialisation of the economy – The sources of technical inertia

• A growth engine with disequilibrium:

– With imperfect foresight and routine behaviours – Allowing for structural imbalances (endebtedness, unemployment and informal economy) and endogenous shocks

• An endogenous growth framework to minimize the trap of the

combinatory explosion

A risky departure from the Golden Age growth paradigm?

• The Solow’s advices (1988):

– a) economic cycles are not optimal responses to random shocks around an optimal pathway – b) progress in growth theory requires to better capture the evolution

• f the structure of final demand
• Computational capacity now exists of overcoming the Harrod-

Domar’s knife-edged versus steady growth Solow’s paradigms

• Back to “Kaleckian” dynamics with equipment vintages and

flexibilities in a) the “equipment intensity” of growth b) the use of energy, labour and other inputs

A recursive and modular architecture: static equilibria + dynamic relations informed by sector based expertise

Updated parameters (tech. coef., stocks, etc.) Bottom-up sub models (reduced forms) Marco economic growth engine Price-signals, rate of return Physical flows Static Equilibrium t Static equilibrium t+1 Time path

Land-use Electricity, Fossil fuels Transport

Static equilibria under constraints stemming from technical endowments and routine micro and macro behaviors

Transferts Charges Taxes Prix Salaires Demande finale Taxes

Ménages

Fonction d'utilité sous contraintes

Secteurs de production

Sous contrainte de court- terme (capacité+technique)

Administrations Publiques

Redistribution & Infrastructures Exportations Importations

Marchés mondiaux

Biens et flux de capitaux

Transports : budget-temps et capacités (infra+équipements) Énergie : induction des besoins par les transports et le logement (stock de m²) Balance commerciale et Balance des capitaux endogènes Friction sur les facteurs de production : Sous- ou sur- capacités Chômage

Suming up : Main features of the system

– Production functions conditional upon sector – based expertise – (Partially) Endogenous Structural Change: induced interactions between demand and supply that affect the growth engine – Endogenous Capital flows function of savings, returns on investment and country-risk and national public policies (amount

• f domestic savings put in an international pool)

– Representation of phases of over and under investment in production capacities; the timing of policies matter

EPE - 6 décembre 2004

An illustration with the transportation sector

Sous double contrainte : Maximization d'utilité :

( )

( ) ( )

, ,

k,i , k,j , goods services

, C

k j k i

k k i k j i j

C S bn S bn

ξ ξ

= − −

Π

k k

U

• (

)

² ² , , , , , Energies cars cars m m k k k i k i k Ei k k Ei k k Ei i Ei

ptc Income pArmC C pArmC S S α α ⋅ = ⋅ + ⋅ ⋅ + ⋅

• ( )

, j

means of transport T

k Tj

pkm k j

Tdisp u du τ =

• ,

, , , , , , , ,

k k k k k

k public k air k cars k nonmotorized k mobility k air k public k cars k nonmotorized

pkm pkm pkm pkm S b b b b

η η η η η −

• =

+ + +

• Capacité=f ( infrastructures, équipements )

Côté consommation finale

Steps of the development of reduced forms (with the collaboration of industry)

– Energy sector (2005 – 2006) – Energy intensive industry (2006 – 2007)

• Steel
• Cement
• Aluminium
• Glass
• Refining industry

– End-use products including transport and buildings Infrastructures (2007)

EPE - 6 décembre 2004

Moteurs de la croissance

Démographie (nivaux,flux) Productivité générale Degré d’extraversion des économies Epargne et flux de capitaux

EPE-IDDRI – Paris – 7 mars 2006

Marchés de l’énergie

Consommation C L Localisation T Technologie

Scenarisation principles: articulating three main sets of ‘visions’

Picturing development patterns

Consumption Patterns

• Buildings, housing equipments
• Obsolescence rates
• Mobility

Technological patterns

Economies of scale vs distributed technologies Material efficiency vs renevable Recycling

Location patterns

Urban forms Sea-side vs continental

EPE-IDDRI – Paris – 7 mars 2006

C T L

Illustrative results: the induction of mobility through higher efficiency of cars

Mobilité automobile OCDE

5,00E+12 7,00E+12 9,00E+12 1,10E+13 1,30E+13 1,50E+13 1,70E+13 1,90E+13 2,10E+13 2,30E+13

pkmauto BAU OCDE pkmauto 450ppm OCDE pkmauto 550ppm OCDE

EPE – 19 Mai 2005

2 4 6 8 10 12 400 600 800 1000 1200 1400 1600 1800

Carbon budget 2000-2100 (GtC) Annual tax increment from 2005 to 2100 Carbon tax only Combined: Carbon tax + transportation infrastructure policy

Infrastructure policy lightens the required tax burden.

450 ppm 550 ppm

Energy burden for households - Hydro and Nuclear policies

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 1990 2000 2010 2020 2030 2040 2050 2060

BAU CHN BAU IND Nuke & Hydro policies CHN Nuke & Hydro policies IND

GDP variations - Hydro and Nuclear policies

• 3,0%
• 2,0%
• 1,0%

0,0% 1,0% 2,0% 3,0% 4,0% 2000 2010 2020 2030 2040 2050 2060 CHN IND w/o policies on apital flows CHN IND with policies on apital flows