1. SGM P.R. Shukla

2. Second Generation Model

3. Top-Down Economic Models  Project baseline carbon emissions over time for a country or group of countries  Find the least-cost way to meet any particular emissions constraint  Provide a measure of the carbon price, in dollars per metric ton  Provide some measure of the overall cost of meeting an emissions target

4. Key SGM Characteristics 2 Computable General Equilibrium 2 12 Global Regions (Developed in International Collaborations) 2 Multiple Greenhouse Gases 2 Internally Generated Demographics 2 Vintaged Capital Stocks 2 Explicit Energy Technology 2 Land Resource Constraints

5. SGM 2000: Structure and Sectors

6. Computable General Equilibrium 2 Based on Economic Principles. 2 All economic activities are included in some sector of the model. 2 Market equilibrium -- ALL markets must clear simultaneously. 2 Maximization Behavior -- consumers, utility; producers, net worth.

7. SGM Regions u Annex I  United States  Canada  Western Europe  Japan  Australia  Former Soviet Union  Eastern Europe u Non Annex I  China  India  Middle East  Mexico  South Korea  Rest of World

8. Multiple Greenhouse Gases 2 CO 2 2 CH 4 2 CO 2 N 2 O 2 NOx 2 SOx 2 NMHC

9. Internal Demographics 2 Age structure & gender of the population is developed internally using:  fertility rates  survival rates  net migration rates 2 Labor force participation rates can be age & gender specific.

10. SGM Inputs & Outputs Factors of Production 2 Capital, 2 Labor, 2 Land, 2 Agriculture, 2 Energy, & 2 Materials. Model Outputs 2 Agriculture, 2 Energy, 2 Materials, 2 Savings, 2 Consumption & 2 GDP.

11. Energy Focus 2 8 Energy Sectors 2 Resources and Reserves of Energy Resources 2 Vintaged Energy Using Technologies

12. SGM Is Part of GCAM 2 SGM is part of the Global Change Assessment Modeling (GCAM) System, an integrated assessment model  computes concentrations of greenhouse bases such as CO 2,  can compute  T and sea level rise.

13. Production Decisions 2 Production occurs out of existing capacity and its vintage  limited by previous investments, &  then current technologies 2 Retirement of old capacity occurs when  Cannot cover operating expenses  Old age -- fixed life, or  Policy -- forced retirement

14. Production Functions u Technical coefficients control change in input-output ratios over time. u Energy coefficient is similar to AEEI (Autonomous Energy Efficiency Improvement). ),,,;,,,( MtEtLtKtttttt aaaaMELKfQ 

15. New Capacity 2 Investment is based on expected profitability.  available technology  price expectations, &  policy expectations 2 Price & Policy Expectations can be either forward or backward looking.

16. Investment 2 Capital market balances supply and demand of loanable funds. 2 Investment resources distributed among investments with positive expected net profitability  no resources flow to expected losers  the higher the expected rate of return, the greater the share of the investment pool

17. Energy Production 2 Energy production out of reserves. 2 Additions to reserves from the resource base.  additions depend on expected profitability  resource availability.

18. Energy Technology 2 Hierarchical model.  sectors,  sub-sectors, &  technologies. 2 Explicit energy technologies can be introduced into the model.  e.g. natural gas combined cycle turbines for power generation.

19. Issues the SGM Can Address 2 Assessing impacts of greenhouse gas emissions mitigation policies on GDP, consumption and energy. 2 Value of emissions rights trading. 2 Value of “when” flexibility. 2 Relative costs and benefits to regions of the world of alternative protocol formulations.

20. SGM Strengths 2 Built specifically for climate policy analysis. 2 Multiple greenhouse gases.  Part of an Integrated Assessment model -- e.g. can compute CO 2 concentrations or  T. 2 General equilibrium -- all markets clear. 2 Detailed energy supply sector. 2 Can be run in alternative foresight modes. 2 Internal demographics. 2 International Collaborations.

21. SGM Limitations 2 Not a business cycle model -- does not estimate inflation or unemployment policy impacts. 2 Limited energy end-use detail. 2 Provides no sub-national disaggregation for the United States.

22. SGM Data Requirements Original DataDerived Data for SGM 1990 Input-Output Table 1990 Energy Balances Hybrid Input-Output Table Annual Investment Data by SectorCapital Stocks by Sector Data on Fossil Fuel ResourcesResource Grades Electricity Supply: generation, installed capacity, energy consumption, capital costs, operating costs Input-output representation of electricity generation by fuel National Income Accountstax rates, savings rates

23. international trade Bottom-Up Energy Technology Ecosystem Impacts Top-Down Economic Model (integration tool) Region ARegion B Climate Scenarios Model Integration

24. India Results

25. Real GNP and components Reference Scenario

26. Energy Consumption Reference Scenario

27. Electricity by sub-sector Reference Scenario

28. CO 2 Emissions Reference Scenario 0 100 200 300 400 500 600 700 800 900 1000 199019952000200520102015202020252030 Teragrams carbon Base

29. Policy scenarios u Alternate growth scenarios  Low5%  High7% u Alternate tax scenarios  Fixed tax: $25, $50, $100 per tC  Increasing tax

30. Policy scenarios u Advanced technology scenarios  High Solar  Medium Solar with $5 tax  Medium Solar with $25 tax

31. Real GNP

32. Energy consumption

33. Energy Mix: Low Growth

34. Energy Mix: High Growth

35. Results Tax Scenarios

36. Energy Consumption Tax Scenarios

37. Energy Consumption: Fuel-wise OIL 0 2 4 6 8 10 12 14 16 199019952000200520102015202020252030 GAS 0 1 2 3 4 5 6 7 199019952000200520102015202020252030 COAL 0 2 4 6 8 10 12 14 16 18 20 199019952000200520102015202020252030 NUCLEAR 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 199019952000200520102015202020252030 HYDRO 0 0.5 1 1.5 2 2.5 199019952000200520102015202020252030 Base$25 Tax$50 Tax$100 Tax SOLAR 0 0.1 0.2 0.3 0.4 0.5 0.6 199019952000200520102015202020252030 Tax Scenarios

38. Compare Ref. Energy Consumption: $100 Tax

39. CO 2 Emissions Tax Scenarios

40. Change in GNP over base case Tax Scenarios

41. Change in GNP over base case Tax Scenarios

42. CO 2 Emissions: Cumulative Tax Scenarios

43. Results Advance Technology Scenarios

44. CO 2 Emissions

46. Solar in Electricity

47. Change in GNP over base case