Transitions towards a F4 society A three year modelling program supported by IDDRI Jean-Charles Hourcade, Renaud Crassous, Olivier Sassi, Frederic Ghersi, Sandrine Mathy, Vincent Gitz, Henri Weitzman
A specific institutional setting • IDDRI: a Research Foundation funded by French Ministries (foreign affairs, finance, environment, research, equipment) and 15 enterprises • EPE : Enterprises for the Environment; a consortium of 22 energy intensive entreprises including the cement,steel and non ferrous industry • Energy enterprises including EDF (Electricité de France) and Total (oil company) The CIRED (Cnrs, Ehess, Enpc, Engref, Meteo – France, Cirad) • • The LEPII (Cnrs and University of Grenoble)
A program based on a shared dissatisfaction between modellers and industry • A F4 objective cannot be reached without technological breakthrough and deep changes in final demand • This breakthrough will not been achieved unless industry sees the F4 objective as a mobilizing utopia instead of a pure constraint • To help policy discussions the current state of the art in long term modelling has to be improved in the following directions: – The consistency of the dialogue between macro-economists and sector-based expertize – To scrutinize the transformation of the final demand – Transition mechanisms ‘instead of steady state economies’ – Macroeconomic parameters in a world economy under structural disequilibrium – Sensitivity to controversial judgments
SRESS : the trap of the combinatory explosion? Source : IIASA, Nakicenovic
Parameters of the KAYA entity are in fact linked by endogenous interplays E GDP Energy CO = ⋅ ⋅ ⋅ E POP POP 2 CO GDP Energy 2 CSM – Paris – 24 mars 2005
Two Main Policy Questions • For minimizing the costs a F4 objective what is the relative role of: – The decarbonisation of energy supply (fuel switching and minimisation on the conversion losses – The end – use energy efficiency – Structural changes in final demand of goods and services (dematerialisation of growth patterns) – Macroeconomic parameters in opened economies • What ‘climate regime’ is capable to incite – Industry to provide responses to the first three challenges (technologies, products) – Goverments to provide the most favorable macroeconomic context and to mobilize –non carbon price only - policies
A scientific strategy with four components …. • An ‘novel’ modelling framework (Imaclim – Poles) • A representation of alternative development styles • A specific scenario approach • A heuristic approach with a permanent dialogue with industry and other stakeholders
… and relying on two pre-existing models Modèle POLES (LEPII-EPE) • Horizon 2050 Investissement • Monde en 38 zones effet d’éviction, spillovers, progrès technique induit • 24 productions d’électricité Emploi Mise en cohérence • 11 usages finaux de l’énergie quantités/prix • Marchés mondiaux endogènes • 6 gaz à effet de serre Revenus Consommations Modèle IMACLIM (CIRED) Matrice Input Output propagation des Technologies signaux prix Géographie Fiscalité humaine Calibrage des Réformes écofiscales, double dividende ? fonctions • Etalement urbain Marchés comportementales internationaux • Evolution des modes de travail et de loisir (demandes de biens et de facteurs) • Inerties des infrastructures • Choix modaux Prospective énergétique Prospective macroéconomique EPE - 6 décembre 2004
What would we like to represent? Commerce Productivité international Flux de Démographie capitaux Growth engine Development patterns Energy Coût des parameters technologies Infrastructures Stock de Parc ressources fossiles Stock Progrès automobile d'équipements technique
Main modelling principles • An hybrid modelling structure in physical and money flows in order to secure the dialogue with sector - based expertise and make explicit – the assumptions governing the dematerialisation of the economy – The sources of technical inertia • A growth engine with disequilibrium : – With imperfect foresight and routine behaviours – Allowing for structural imbalances (endebtedness, unemployment and informal economy) and endogenous shocks � An endogenous growth framework to minimize the trap of the combinatory explosion
A risky departure from the Golden Age growth paradigm? • The Solow’s advices (1988): – a) economic cycles are not optimal responses to random shocks around an optimal pathway – b) progress in growth theory requires to better capture the evolution of the structure of final demand • Computational capacity now exists of overcoming the Harrod- Domar’s knife-edged versus steady growth Solow’s paradigms • Back to “Kaleckian” dynamics with equipment vintages and flexibilities in a) the “equipment intensity” of growth b) the use of energy, labour and other inputs
A recursive and modular architecture: static equilibria + dynamic relations informed by sector based expertise Time path Static Equilibrium t Static equilibrium t+1 Updated parameters (tech. coef., stocks, etc.) Fossil fuels Electricity, Transport Land-use Bottom-up sub models (reduced forms) Marco economic growth engine Price-signals, rate of return Physical flows
Static equilibria under constraints stemming from technical endowments and routine micro and macro behaviors Transports : budget-temps et capacités (infra+équipements) Ménages Fonction d'utilité sous contraintes Énergie : induction des besoins Taxes par les transports et Prix Demande le logement (stock de m²) finale Transferts Salaires Friction sur les Exportations Marchés mondiaux Secteurs de production facteurs de production : Sous contrainte de court- Biens et flux de capitaux Sous- ou sur- capacités terme (capacité+technique) Importations Chômage Charges Taxes Balance commerciale et Administrations Balance des capitaux Publiques endogènes Redistribution & Infrastructures
Suming up : Main features of the system – Production functions conditional upon sector – based expertise – (Partially) Endogenous Structural Change : induced interactions between demand and supply that affect the growth engine – Endogenous Capital flows function of savings, returns on investment and country-risk and national public policies (amount of domestic savings put in an international pool) – Representation of phases of over and under investment in production capacities; the timing of policies matter EPE - 6 décembre 2004
An illustration with the transportation sector � Côté consommation finale Maximization d'utilité : � � ( ) ξ ξ ( ) ( ) Π k i , k j , = − − U C S , C bn S bn k k k k,i k i , k,j k j , goods i services j − η � � η η η η k � � � � � � � � k k k k pkm pkm pkm pkm � � � k public , � � k air , � � k cars , � � k nonmotorized , � = + + + S � � � � � � � � � � k mobility , � b � b � b � � b � � � � � k air , k public , k cars , k nonmotorized , Sous double contrainte : � � ( ) cars cars m ² m ² ⋅ = ⋅ + ⋅ ⋅ α + ⋅ α ptc Income pArmC C pArmC S S k k k i , k i , k Ei , k k Ei , k k Ei , i Energies Ei pkm k Tj , � � ( ) = τ Tdisp u du k j means of transport T 0 j Capacité=f ( infrastructures, équipements )
Steps of the development of reduced forms (with the collaboration of industry) – Energy sector (2005 – 2006) – Energy intensive industry (2006 – 2007) • Steel • Cement • Aluminium • Glass • Refining industry – End-use products including transport and buildings Infrastructures (2007) EPE - 6 décembre 2004
Scenarisation principles: articulating three main sets of ‘visions’ Consommation C Productivité générale Démographie (nivaux,flux) Moteurs Marchés de la de croissance l’énergie Epargne et flux de T L capitaux Technologie Localisation Degré d’extraversion des économies EPE-IDDRI – Paris – 7 mars 2006
Picturing development patterns Consumption Patterns Buildings, housing equipments � � Obsolescence rates � Mobility C Technological patterns Location patterns T L � Economies of scale vs distributed technologies � Urban forms � Material efficiency vs renevable � Recycling � Sea-side vs continental EPE-IDDRI – Paris – 7 mars 2006
Illustrative results: the induction of mobility through higher efficiency of cars Mobilité automobile OCDE 2,30E+13 2,10E+13 1,90E+13 1,70E+13 1,50E+13 1,30E+13 1,10E+13 9,00E+12 7,00E+12 5,00E+12 pkmauto BAU OCDE pkmauto 450ppm OCDE pkmauto 550ppm OCDE EPE – 19 Mai 2005
Infrastructure policy lightens the required tax burden. Carbon tax only Combined: Carbon tax + transportation infrastructure policy 12 450 ppm 550 ppm Annual tax increment from 2005 to 2100 10 8 6 4 2 0 400 600 800 1000 1200 1400 1600 1800 Carbon budget 2000-2100 (GtC)
Energy burden for households - Hydro and Nuclear policies 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% 1990 2000 2010 2020 2030 2040 2050 2060 BAU CHN BAU IND Nuke & Hydro policies CHN Nuke & Hydro policies IND
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