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USE OF MODELS FOR MEDIUM AND LONG TERM PROJECTIONS

METHODOLOGY OF EMISSIONS PROJECTIONS FOR BELGIUM (Third national communication, April 2002). USE OF MODELS FOR MEDIUM AND LONG TERM PROJECTIONS. Medium term projections: combination of a macro-sectoral econometric model (HERMES) and of a technico-economic simulation model (EPM)

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USE OF MODELS FOR MEDIUM AND LONG TERM PROJECTIONS

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  1. METHODOLOGY OF EMISSIONS PROJECTIONS FOR BELGIUM (Third national communication, April 2002)

  2. USE OF MODELS FOR MEDIUM AND LONG TERM PROJECTIONS • Medium term projections: combination of a macro-sectoral econometric model (HERMES) and of a technico-economic simulation model (EPM) • - Long term projections: use of a long term multi-period energy technology optimisation model (MARKAL) and of an applied general equilibrium model (GEM-E3) • Projections computed for the periods 2000-2010 (medium term instruments) and 2010-2020 (long term instruments • - scenario with measures • - scenario with additional measures • - ..NO scenario wthout measures

  3. Medium term projectionsMacroeconomic level National macro-sectoral model HERMES Energy global balances for BELGIUM Energy related GHG emissions Other GHG Emissions (Industrial processes, agriculture, waste…) Total GHG Emissions

  4. Main characteristics of the macroeconomic model • Class of macro-econometric models based on time series • Keynesian mechanisms; behaviour of agents based on microeconomic foundations ; Top-down approach (but: macro totals = sum of sectoral figures) • Geographical coverage: Belgium • Scale • 4500 equations, of which 450 regressions (ECM) • 600 exogeneous variables • 16 Branches • 4 Production factors • 15 Consumption categories (+ 3 subdivisions) • 5 institutional sectors • 8 Energy Products

  5. Energy products and GHG gasesI. Energy products • Energy products • Solid fuels: coal, coke • Liquid fuels: crude oil, motor spirit, diesel oil, residual fuel oil, naphtas and kerosenes • Gases: natural gas, coke-oven gas,blas-furnace gas • Electricity • Renewables • Computation of energy consumption per branch and agent (households, firms, public administrations) • Output: Coherent energy balances based on Eurostat methodology; calculation for each year of the projection

  6. Energy products and GHG gasesII. GHG gases • 1.Energy • Fuel Combustion • Energy Industries CO2, CH4, N2O • Industry CO2, CH4, N2O • Transport CO2, CH4, N2O • Other Sectors CO2, CH4, N2O • Fugitive Emissions CH4 • 2. Industrial Processes • Industry CO2, CH4, N2O,HFC, SF6 • Energy CO2 • 3. Agriculture CH4, N2O • 4. Waste CO2, CH4, N2O • Total CO2, CH4, N2O,HFC, SF6

  7. Outputs of the macroeconomic model • GDP and components (consumption, investments, external trade,…) • Activity per branch (production, value added, investments) • Labour demand per category • Costs and prices • Sectoral accounts (households, firms, rest of the world,…) • Detailed public finances • Energy balances, based on Eurostat methodology • GHG emissions: given according to the GHG inventory classification, but…

  8. Outputs of the macroeconomic model • … • For energy related CO2 emissions: differences between our starting points and the latest available inventory due to methodological problems; • For other GHG emissions: same starting points, in theory

  9. Medium term projectionsMicroeconomic level • Use of EPM model: Energy/ Emission Projection Model (developed by ECONOTEC) • Bottom up simulation model (and multi-pollutant) covering a time horizon of 10-15 years • Detailed description of: • Industry: 90 activities; • Residential sector: 14 kinds of housings; • Tertiary sector: 30 sub-sectors for energy consumption • Transportation • Calculation of emission reduction cost curves

  10. Medium term projectionsCombination of Macro and Micro approaches • Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…)

  11. Medium term projectionsCombination of Macro and Micro approaches • Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) • Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,…

  12. Medium term projectionsCombination of Macro and Micro approaches • Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) • Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,… • Simulation of the macroeconomic level with the new information

  13. Medium term projectionsCombination of Macro and Micro approaches • Step 1: Identification of economically profitable energy savings potentials: microeconomic level (more than 100 measures identified for industry, services, households,…) • Step 2: Translation of this microeconomic information at the macroeconomic level: direct consequences for the energy coefficients, the energy costs, the employment,… • Simulation of the macroeconomic level with the new information • But: -BAU scenarios not necessarily the same in the two levels • - Identification of energy savings potentials can be controversial

  14. energy consumption per euro of GDP CO2 emissions Scenarios presented:I. Baseline scenario= « With measures » scenario • This scenario only takes into account firmly decided measures • - GDP average increase: 2.4% during the period 2001-2012 • - moderate increase of energy needs (evolution of energy needs in industry rather low) - Decrease of energy consumption per euro of GDP (chart 1) • - However: increase (even if limited) of CO2 emissions: the Kyoto requirement is not achieved (chart 2)

  15. Scenarios presented:II. « With additional measures » scenarioA. Introduction of a CO2 tax • Introduction of a CO2 tax: 1.3 €/ton of CO2 in t; 11.5 €/ton of CO2 in t+10 • Simultaneous reduction of other taxes (social security contributions) • No negative effect on GDP growth • slight positive effect for employment • significant impact on energy demand and on CO2 emissions… • …however not sufficient for Kyoto targets

  16. Scenarios presented:II. « With additional measures » scenarioB. Effects of non-fiscal measures • Micro economic evaluation of energy savings potential (use of a specific model:EPM) • Incorporation of microeconomic information into the macro model • Positive effects on GDP growth; • employment gains • decrease of energy consumptions: -4.4 % in t+10 • important impact on CO2 emissions(7.5 Million of tons avoided)

  17. Remaining problems • Sensitivity analysis: choice of hypotheses!! • Data quality • Combination of the models • …

  18. END

  19. branches Agriculture Energy Manufacturing industries intermediary goods equipment goods consumption goods Construction Transports and communic. Trade, lodging and catering Credit and insurances Health care Other market services General government services Other non market services Further disaggregation for the next Communication: Transports and communications disaggregated in Railroad transport Urban and road transport Water and air transport Auxiliary transport activities and communications Branches considered

  20. Inputs/ outputs of the model • Inputs • International environment • Evolution of external markets • Prices of commodities (of which energy products) • Interest rates • Exchange rates • National policies • Fiscal policy • Social policy • Others (labour market,…) • Others (demography, average temperature, structure of electricity production,…)

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