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
JOBS
Linkages
ENV-Linkages
WALRAS
GREEN GREEN
1987 1990 1992
1997 2000 2004
MIT-EPPA
Organisation for Economic Co-operation and Development (OECD)
Time
2011
2

•
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)
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Aggregation ENV-L: 15 Regions Aggregation ENV-L: 29 Regions
Region ID Label
CAN Canada
JPK Japan & Korea
OCE Oceania
RUS Russia +
USA USA
WEU European Union & EFTA
RAN Rest of Annex I
BRA Brazil
CHN China +
IDN
IND
Indonesia
India
MEA Middle East & Northern Africa
MEX Mexico
ZAF South Africa
ROW Rest of the World
Region ID Label
CAN Canada
JPN Japan
OCE Oceania
RUS Russia +
USA USA
E15 European Union 15
ENO EU countries non OECD
UKR Ukraine +
TUR Turkey
BRA Brazil
CHN China +
IDN
IND
Indonesia
India
MEA Middle East
MEX Mexico
ZAF South Africa
RCA Rest Central America
TAN Asia-Stan
WAF Western Africa
SEA Southeastern Asia
Region ID
KOR
EOC
EFT
RCE
NAF
RSA
SAF
EAF
STA
Korea
EFTA
Label
Rest of EU OECD
Rest of Central Europe
Northern Africa
Rest South America
Rest of Southern Africa
Eastern Africa
Rest of South Asia
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5 agriculture related sectors
• Rice cultivation, other crops, livestock, forestry, fisheries
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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
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6 other sectors
• Food products, other mining, other manufacturing, transport services, services, construction & dwellings
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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
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Socio-economic data
• GTAP 7.1 database; UN Population projections; World Bank, IMF macro projections
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Environmental data
• CO
2 emissions harmonized with IEA
• Agricultural emissions: CO
2 from energy use; CH
4 from rice cultivation, enteric fermentation and manure; N
2
O from manure and soils – only CH
4 from rice linked to land use, others to production level
• Projections for non-CO
2
GHG and LULUCF emissions (CO process of harmonization with IMAGE
2
) in the
•
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
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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
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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
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4
6
4
3
2
3
1
1
2
0
-1
6
5
-2
Source: ENV-Linkages model projection
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2
Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE
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Step by step
• First focus on CO
2 emissions from deforestation and afforestation
• Later expand agricultural sector and include bioenergy
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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
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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
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Grains Sugar Oilseeds
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1800
1600
1400
1200
1000
800
600
400
200
0
2004
2050
Source: draft ENV-Linkages model projection ; still to be harmonized with IMAGE
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OECD Environmental Outlook
• Wide range of policy simulations focus on Climate change,
Biodiversity, Water, and Health & Environment
• Collaboration with IMAGE suite of models
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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
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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
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Rob Dellink
OECD Environment Directorate rob.dellink@oecd.org
+33 (0) 1 45 24 19 53
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