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Model simulations for OECD’s
Environmental Outlook: Methods
and Results
Presentation at the
Fourth Annual Conference on Global Economic Analysis
Purdue University, 27-29 June 2001
by
Nils Axel Braathen
OECD Environment Directorate
OECD
OECD’s Environmental Outlook
• Published for the first time in April 2001.
• Economy-based assessment of environmental
pressures and conditions to 2020.
• In part based on model simulations.
• Used OECD’s general equilibrium model JOBS...
• ... to “drive” the PoleStar system of Stockholm
Environment Institute in Boston, USA.
• Highlights critical issues through wide use of
OECD
Structure of production in JOBS
Output in a given sector
Aggregate non-energy
intermediate demand
Generally  = 0.0
Total demand for each nonenergy intermediate good
Armington specification,
=1-5
Non-energy intermediate
demand by region of origin
Demand for Value
added + Energy bundle
 = 0.05
 = 0.12 in old vintages, 1.01 in
new, 0 in most energy sectors
Demand for Capital +
Energy bundle
Labour
demand
σ = 0 for old vintages, 0.8 in
new, 0 in most energy sectors
Demand for Capital
and Other resources
Demand for
Energy bundle
OECD
Structure of production in JOBS
Demand for Capital
and Other resources1)
Demand for
Energy bundle
σ = 0 in old vintages,
0.1 in new vintages.
Capital
demand
σ = 0.25 in old vintages, 2 in new,
but 0 in most energy sectors.
Demand for
Other resources1)
Coal
demand
Crude oil
demand
Natural gas
demand
1)
Concerns Land in the
Rice, Other crops and
Livestock sectors, and
Natural resources in the
Forestry, Fisheries,
Minerals, Coal, Crude oil
and Natural gas sectors.
Refined oil
demand
Gas distribution
demand
Electricity
Demand
Armington specification,  = 1 - 10
Demand for each energy
source by region of origin
OECD
Links between JOBS and PoleStar
• Energy use
– Fuel demand is generally driven by JOBS.
– Inputs of nuclear, hydro and renewables into electricity
generation are based on IEA’s World Energy Outlook.
– Fuel shares for district heat production are held at base
year levels.
OECD
Links between JOBS and PoleStar
(Continued)
• CO2 emissions
– Based on IPCC guidelines.
– Combustion and feedstock use (in Chemicals)
are included.
– Industrial process emissions are not included.
• SO2 emissions
– Emission intensities are applied to fuel
consumption in all sectors.
– Process emissions from the non-ferrous metals
sector are also included.
OECD
Links between JOBS and PoleStar
(Continued)
• BOD and Nitrogen Loading -- From
households
– BOD loadings are determined by the size of urban
and rural populations, and by regional GDP per
capita.
– A fraction of sewered urban wastes is assumed to
be treated to some degree, while in rural areas it is
assumed that the population is not connected to
central sewer systems, and no waste is treated.
OECD
Links between JOBS and PoleStar
(Continued)
• BOD and Nitrogen Loading -- From livestock
– It is assumed that only livestock in feedlots
contribute significantly to water pollutant loads.
– For the policy shocks, relative trends for waste
generation compared to Reference Scenario levels
are estimated from relative trends in real input of
Other crops to the Livestock sector in JOBS.
OECD
Links between JOBS and PoleStar
(Continued)
• BOD and Nitrogen Loading -- From fertilisers
– Changes in inputs of Chemicals to Rice and Other
crops are used as proxies for changes in fertiliser
use.
– It is assumed that 30% of the nitrogen applied is
lost to leaching and runoff.
– It is also assumed that fertilisers do not contribute
to oxygen demand.
OECD
Links between JOBS and PoleStar
(Continued)
• BOD and Nitrogen Loading -- From industry
– Pollution generation is expressed as the product
of value added of industry and an intensity.
– It is assumed that aggregate BOD intensities are:
• 5.5 kg/million $/day for GDP/capita below $500,
• 4.0 kg/million $/day for GDP/capita above $5,000,
• and decline steadily for GDP/capita between $500 and
$5,000.
OECD
Approximation of “Market Price
Support” removal
• Introduced producer taxes over a 5 years period to
Rice, Other Crops and Livestock:
Estimated “Market Price
Support” in % of total value of
production in agriculture
NFT
WEU
CEU
JPK
ANZ
7.4
20.9
19.3
58.8
3.5
OECD
Approximation of “Market Price
Support” removal (Continued)
• At the same time, consumer subsidies of a similar
amount was given to Meat and Other food:
NFT
WEU
CEU
JPK
ANZ
Consumer subsidy rates estimated to cause a
revenue loss similar to the extra revenue
raised through the applied producer taxes
6.3
10.0
17.5
27.5
6.0
OECD
Approximation of “Market Price
Support” removal (Continued)
• No differentiation between the three “producing
sectors”, nor between the two “consumption
sectors”.
• Very limited macro-economic impacts:
– Small decreases in GDP in most regions
• However, considerable environmental impacts -and “leakages” -- were found.
OECD
ARW
LAT
MEA
SOA
-5%
EAS
0%
CHN
0%
FSU
5%
ANZ
5%
JPK
10%
CEU
10%
WEU
15%
NFT
15%
-5%
-10%
-10%
-15%
-15%
-20%
-20%
-25%
-25%
-30%
-30%
OEC
D
non-O
ECD
Worl
d
Impacts on irrigation water use of removal
of all agriculture support in OECD
OECD
-10%
-10%
-15%
-15%
-20%
-20%
-25%
-25%
OECD
Worl
d
-5%
non-O
ECD
ARW
LA T
MEA
SOA
EAS
CHN
-5%
FSU
0%
ANZ
0%
JPK
5%
C EU
5%
WEU
10%
NFT
10%
OEC
D
Impacts on Livestock BOD loading of
removal of all agriculture support in OECD
-5%
-5%
-10%
-10%
-15%
-15%
-20%
-20%
OECD
Worl
d
OEC
D
ARW
LAT
MEA
SOA
EAS
CHN
FSU
0%
ANZ
0%
JPK
5%
C EU
5%
WEU
10%
NFT
10%
non-O
ECD
Impacts on nitrogen water pollution of
removal of all agriculture support in OECD
Removal of energy subsidies and
introduction of carbon-related taxes
• All energy-related subsidies in the OECD regions
included in GTAP were removed as of 1996.
• In addition, ad valorem taxes on Coal, Crude oil and
Natural gas were increased 2 / 1.6 / 1.2 percentage
points each year between 1996 and 2020.
• These taxes are not proper carbon-taxes.
• Very small impacts on GDP (-0.1% for OECD as a
whole in 2020, compared to the Reference Scenario).
OECD
-25%
-30%
-35%
-40%
Coal
CrudeOil
NaturGas
RefOil
GasDistr
Elect
1
-20%
non-A
nnex
-20%
1
-15%
Anne
x
-15%
d
-10%
Worl
-10%
non-O
E CD
-5%
OE C
D
RO W
LAT
MEA
SOA
EAS
CH N
FS U
-5%
ANZ
0%
J PK
0%
CEU
5%
WEU
5%
NFT
Percentage change compared to the Reference Scenario
Impacts on demand for energy products of
energy subsidy removal + “carbon taxes”
-25%
-30%
-35%
-40%
OECD
-10%
-15%
-15%
-20%
-20%
-25%
-25%
1
Anne
x
Worl
d
SO2 -- Subsidy elimination
SO2 -- Subsidy elimination + Carbon-related taxes
-30%
CO2 -- Subsidy elimination
-30%
CO2 -- Subsidy elimination + Carbon-related taxes
-35%
-35%
OECD
NonAnne
x1
-10%
NonOEC
D
-5%
OEC
D
LAT
ARW
MEA
EAS
SOA
CHN
FSU
-5%
ANZ
0%
JPK
0%
CEU
5%
WEU
5%
NFT
Percentage change compared to the Reference Scenario
Impacts on total CO2 and SO2 emissions
60%
-40%
40%
-50%
-60%
etals
Paper + p
ulp
-20%
Non-ferr.
m
-10%
l
12%
Minerals
0%
10%
8%
-30%
6%
-40%
4%
20%
-50%
2%
0%
-60%
0%
OECD
Share of total emission changes
-30%
14%
Iron + ste
e
80%
16%
10%
Chemicals
-20%
100%
Percentage change compared to the Reference Scenario
-10%
CO2 -- Subsidy elimination
20%
CO2 -- Subs.elim + taxes
Share of total CO2 changes
Share of total emission changes
120%
Industry
0%
Transport
140%
Services
10%
Household
s
SO2 -- Subsidy elimination 160%
SO2 -- Subs.elim + taxes
Share of total SO2 changes
Energy
20%
Agricultu
re
Percentage change compared to the Reference Scenario
Decomposition of impacts on CO2 and SO2
emissions in North America
Decomposition of impacts on CO2 and SO2
emissions in Western Europe
CO2 -- Subsidy elimination
160%
14%
0%
12%
-10%
10%
-20%
8%
-30%
6%
-40%
4%
-30%
60%
-40%
40%
-50%
20%
-50%
2%
-60%
0%
-60%
0%
OECD
Share of total emission changes
80%
10%
Mine
rals
Chem
icals
Iron
+ ste
el
Nonferr.
meta
ls
Pape
r+p
ulp
100%
Percentage change compared to the Reference Scenario
stry
Indu
sport
Tran
ices
Serv
olds
Hous
eh
Ener
cultu
r
gy
120%
e
0%
Agri
Percentage change compared to the Reference Scenario
140%
-20%
16%
Share of total CO2 changes
10%
-10%
20%
CO2 -- Subs.elim + taxes
SO2 -- Subs.elim + taxes
Share of total SO2 changes
Share of total emission changes
SO2 -- Subsidy elimination
20%
Decomposition of impacts on CO2 and SO2
emissions in Central & Eastern Europe
-30%
60%
-40%
40%
-50%
-60%
-20%
etals
-10%
l
12%
Chemicals
0%
Paper + p
ulp
80%
14%
Minerals
Industry
Transport
Services
100%
10%
Non-ferr.
m
-20%
Household
s
120%
Energy
0%
16%
10%
8%
-30%
6%
-40%
4%
20%
-50%
2%
0%
-60%
0%
OECD
Share of total emission changes
Share of total CO2 change s
Percentage change compared to the Reference Scenario
Share of total SO2 change s
Share of total emission changes
CO2 -- Subs.e lim + taxe s
140%
-10%
20%
SO2 -- Subs.e lim + taxe s
10%
Agricultu
re
Percentage change compared to the Reference Scenario
CO2 -- Subsidy e limination
160%
Iron + ste
e
SO2 -- Subsidy e limination
20%
Decomposition of impacts on CO2 and SO2
emissions in Japan & Korea
-30%
60%
-40%
40%
-50%
-60%
-20%
pulp
Paper +
-10%
. metals
12%
eel
0%
Non-ferr
80%
14%
Iron + st
100%
10%
Minerals
Industry
rt
Transpo
Services
Househo
-20%
ld s
120%
Energy
0%
16%
10%
8%
-30%
6%
-40%
4%
20%
-50%
2%
0%
-60%
0%
OECD
Share of total emission changes
Share of total CO2 changes
Percentage change compared to the Reference Scenario
Share of total SO2 changes
Share of total emission changes
CO2 -- Subs.elim + taxes
140%
-10%
CO2 -- Subsidy
20%elimination
SO2 -- Subs.elim + taxes
10%
Agricultu
re
Percentage change compared to the Reference Scenario
160%
Chemica
ls
SO2 -- Subsidy elimination
20%
Industry
Transport
Services
100%
80%
-30%
60%
-40%
40%
-50%
-60%
Share of total emission changes
-20%
Household
s
-10%
120%
Energy
0%
10%
14%
0%
12%
-10%
-20%
Non-ferr.
metals
Paper + p
ulp
Share of total CO2140%
change s
l
Share of total SO2 change s
Iron + ste
e
CO2 -- Subs.e lim + taxe s
16%
Chemicals
SO2 -- Subs.e lim + taxe s
20%
Minerals
CO2 -- Subsidy e limination
Agricultu
re
Percentage change compared to the Reference Scenario
10%
160%
SO2 -- Subsidy e limination
Percentage change compared to the Reference Scenario
20%
10%
8%
-30%
6%
-40%
4%
20%
-50%
2%
0%
-60%
0%
OECD
Share of total emission changes
Decomposition of impacts on CO2 and SO2
emissions in Australia & New Zealand
Impacts on CO2 emissions in industry sectors
Changes in gross production
6%
Chemicals
Iron&steel
NonFer
Pulp&paper
4%
2%
-4%
-6%
-8%
OECD
ARW
LAT
MEA
SOA
EAS
CHN
FSU
ANZ
JPK
CEU
-2%
WEU
0%
NFT
Percentage changes compared to the Reference Scenario
Minerals
Impacts on CO2 emissions in industry sectors
Changes in energy intensity
2%
Minerals
Chemicals
Iron&steel
NonFer
Pulp&paper
-2%
-4%
-6%
-8%
-10%
-12%
OECD
ARW
LAT
M EA
SOA
EAS
CHN
FSU
ANZ
JPK
CEU
WEU
NFT
Percentage changes compared to the Reference Scenario
0%
Impacts on CO2 emissions in industry sectors
Changes in carbon intensity of energy use
-10%
-20%
-30%
-40%
Minerals
Chemicals
Iron&steel
NonFer
Pulp&paper
-50%
OECD
ARW
L AT
MEA
SOA
E AS
CHN
FS U
ANZ
JPK
CE U
WEU
0%
NFT
Percentage changes compared to the Reference Scenario
10%