Modeling Land Competition Modeling Land Competition Ron Sands Ron Sands Man-Keun Kim Man-Keun Kim Joint Global Change Research Institute Joint Global Change Research Institute Battelle – PNNL – University of Maryland Battelle – PNNL – University of Maryland AIM International Workshop AIM International Workshop Tsukuba, Japan Tsukuba, Japan 19-21 February 2007 19-21 February 2007
Objectives Objectives Extend partial equilibrium land use framework to general equilibrium � Forestry identified as a priority model development item in review of PNNL general equilibrium framework (Second Generation Model) by U.S. EPA Science Advisory Board � What is the right level of abstraction for a recursive CGE model? � Forest dynamics � Number of crops, animal products, forest products � Geographic detail Improve ability to simulate impact of carbon price on land use � Biofuel incentive � Forest management (increased tree rotation age) � Value carbon in unmanaged land 2
Overview Overview Modeling Approaches � Forestry optimization � Partial and general equilibrium economics PNNL Agriculture and Land Use Model (AgLU) � Brief history � Land allocation mechanism Disaggregation of US region into land subregions Forest dynamics � Determination of optimal tree rotation age � Carbon price and rotation age Steady-state simulation What Next? 3
Modeling Approaches Modeling Approaches Intertemporal Optimization � Typical for sector-specific models (e.g. forestry) Intertemporal Equilibrium (perfect foresight) � Efficiency conditions (first order necessary conditions) from intertemporal optimization model become system equations � Allows integration with other types of economic systems (such as agriculture) Recursive Equilibrium � Absence of look-ahead capability makes it difficult to model forestry Steady-State Equilibrium � Exploratory tool � Steady-state modeling of forestry may be able to inform recursive models 4
Relationship to Specialized Forestry Models partial general equilibrium equilibrium intertemporal optimization TSM, FASOM Ramsey growth model intertemporal equilibrium AgLU 2 intertemporal CGE recursive equilibrium recursive CGE steady-state equilibrium AgLU 2x 5
Brief History of AgLU Brief History of AgLU First version completed in 1996 Design � Top-down � Partial equilibrium � Can be run stand-alone or as part of MiniCAM Studies � Role of biomass in carbon policy � Impact of ENSO on North America � U.S. climate impacts 6
Methodology Highlights Methodology Highlights 15-year Time Steps from 1990 through 2095 Land Allocation � Land owners compare economic returns across crops, biomass, pasture, and future trees � Underlying probability distribution of yields per hectare Forest Dynamics � Trees in AgLU grow for 45 years � Two forest markets (current and future) needed for model stability 7
Products in AgLU Products in AgLU Crops (calories) � Rice and Wheat � Coarse Grains � Oil Crops � Other Crops Processed Crops (calories) � Vegetable Oils � Sweeteners and Alcoholic Beverages Animal Products (calories) � Beef and other Ruminant Livestock � Pork and Poultry Commercial Biomass (calories or metric tons) Forest Products (cubic meters) 8
Food Consumption by AgLU Region kcal per person per day 0 1,000 2,000 3,000 4,000 United States Canada OECD Europe Japan Australia and New Zealand Former Soviet Union China and Centrally Planned Asia Middle East Africa Latin America Other Asia Eastern Europe Korea India Crops Processed Crops Animal Products 9
Land Allocation Land Allocation cropland unmanaged managed forest grassland wheat rice coarse oil sugar other food nonfood hay biomass grains crops crops crops crops crops 10
Agriculture-Forestry Data Agriculture-Forestry Data Agriculture-Forestry Data � Food balances � Land use data � Forest and agricultural production United Nations Food and Agriculture Organization (FAO) is the primary source of data Global Trade Analysis Project (GTAP) provides land use and agricultural production data for land classes within a country 11
US Land Classes US Land Classes Why Disaggregate? � Capture geographical heterogeneity � Terrestrial mitigation opportunities vary by land class � Climate impacts will vary by land class Hydrologic Unit Areas (HUAs) � 18 two-digit water basins in US � Fixed location � Useful for climate impact studies � Link to water supply will be important for future work on water and potential for biofuels Base-Year Calibration � No unique way to calibrate base year (calibration is something of an art) � Not easy to calibrate all of the following: land area by product and land class, output by product and land class, prices, costs of production � Exact calibration doesn’t tell you where your model structure can be improved 12
13 Major Water Resource Regions
Forest Dynamics Forest Dynamics Tree growth curves vary across United States Calibration of growth curve to data provided through GTAP Response of forest production to carbon incentive � Optimal tree rotation age increases with carbon price � Faustmann equation (modified by carbon incentive) is an extra system equation paired with unknown rotation age � Modified Faustmann equation includes term that integrates carbon stock or increment of carbon sequestered over tree growth curve � Can calculate carbon incentive either as a rental paid for carbon storage or as full payment for increment sequestered � Computational burden can be reduced by selecting functional form for tree growth curve that has closed-form integral 14
Tree growth curve for southeastern pine plantations (yield in cubic meters as a function of tree age) 1000 800 600 400 200 0 0 20 40 60 80 100 GTAP Yield C1 age^C2 exp(-C3*age) 15
Tree growth curve for Pacific Northwest (yield in cubic meters as a function of tree age) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 20 40 60 80 100 GTAP Yield C1 age^C2 exp(-C3*age) 16
Levelized net present value per hectare at various carbon prices: southern pine plantation trees LNPV with C Incentive 500 400 LNPV ($/ha) 300 200 100 0 0 20 40 60 80 100 120 Age in years Pc=0 Pc=50 Pc=100 Pc=150 Pc=200 Pc=250 Pc=300 Pc=350 Pc400 Assumptions: p t = $49 per cubic meter, c g = $1,000 per hectare, k = 0.2 metric tons carbon per cubic meter of wood, r = 3%, all stored carbon is released to the atmosphere at harvest 17
Levelized net present value per hectare at various carbon prices: Pacific Northwest trees LNPV with C Incentive 800 700 600 500 LNPV ($/ha) 400 300 200 100 0 0 20 40 60 80 100 120 Age in years Pc=0 Pc=50 Pc=100 Pc=150 Pc=200 Pc=250 Pc=300 Pc=350 Pc400 Assumptions: p t = $49 per cubic meter, c g = $750 per hectare, k = 0.2 metric tons carbon per cubic meter of wood, r = 3%, all stored carbon is released to the atmosphere at harvest 18
Steady-State Land Use Simulation Steady-State Land Use Simulation United States � Land use as function of carbon price (up to US$ 300 per ton of carbon) � All other drivers held constant: population growth, agricultural productivity, income India � Land use over time is sensitive to difference in growth rates between agricultural productivity and population growth � Three baselines � Agricultural productivity < population growth � Agricultural productivity = population growth � Agricultural productivity > population growth 19
US Land Simulation with Varying Carbon Prices 500 450 400 350 land area (million ha) unmanaged forest 300 managed forest 250 biomass pasture and fallow 200 crop land 150 100 50 0 0 25 50 75 100 125 150 175 200 225 250 275 300 carbon price (US$ per t) 20
India Land Simulation with Agricultural Productivity Growing Slower than Population 350 300 250 land area (million ha) unmanaged forest 200 managed forest biomass 150 crop land 100 50 0 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 simulation year 21
India Land Simulation with Agricultural Productivity Same as Population Growth Rate 350 300 250 land area (million ha) unmanaged forest 200 managed forest biomass 150 crop land 100 50 0 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 simulation year 22
India Land Simulation with Agricultural Productivity Growing Faster than Population 350 300 250 land area (million ha) unmanaged forest 200 managed forest biomass 150 crop land 100 50 0 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 simulation year 23
What Next? What Next? Near Term � Alternative biofuel pathways � Enhancements to India model � Demand and supply of fuelwood � Land subregions Longer Term � International trade and food security � Valuing carbon in unmanaged land � Crop rotation and multiple crops per year � Water as a limiting resource 24
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