modeling of developing country dynamics: a perspective · modeling of developing country dynamics:...

Modeling of Developing Country Dynamics: A Perspective

Modeling of Developing Country Dynamics:A Perspective

P.R. ShuklaIndian Institute of Management, Ahmedabad, India

Presentation for theAIM Training Workshop

November 7-11, 2005, National Institute for Environment Studies, Tsukuba, Japan


Developing Country Dynamics

1. What make developing countries different?– Different stage of development: priorities and capabilities

– Different economic dynamics than assumed in scenario assessments

– Need and opportunities to align climate and development agenda

2. Modeling vs. Model Developments


Understanding development• Dual Economy

• Multiple Transitions

• Informal Activities

• Subsistence Production

• Market Performance and Disequilibria

• Non-commercial Fuels

• Non-economic Concerns

• Policy Distortions


TransitionsSocio-Economic

Demographic ⎯ Population ⎯ Urban / Rural ⎯ Gender ratio ⎯ Migration

Development ⎯ Soft indicators: Income, Equity, Literacy, Health⎯ Hard indicators: Infrastructure, Housing, Vehicles, Appliances

Political ⎯ Institutions⎯ Laws⎯ Policies


Composition of India's GDP by Sector

1980 - 81

41%

37%

22%

1950 - 51

13%

28%

59%

2003 - 04

24%

51%

25%

Agriculture Agriculture

Agriculture

Industry

Industry

Industry

ServicesServices

Services

22%

Data Source: CMIE and Economic Surveys of India


TransitionsEnergy Resources

Fossil Futures ⎯ Conventional Coal/Gas/ Oil⎯ Unconventional Oil/ Gas

Renewable Energy⎯ Bio-technology⎯ Solar

Large Hydro⎯ Multi-purpose schemes

Nuclear⎯ Fission with zero waste⎯ Fusion


Past Energy transitions: Global & India

0

10

20

30

40

50

60

70

80

90

100

1850 1900 1950 2000

Perc

enta

ge o

f PEC

Traditional renewables

Coal

Oil

Gas

HydroNuclear

Coal

Global0%

20%

40%

60%

80%

1953-54 1960-61 1970-71 1980-81 1990-91 2001-02

Perc

enta

ge o

f PEC

Non-commercialenergy supply

Hydro

Coal & LIgnite

Oil

GasNuclear

India


Energy transition evidences: Electricity consumption by sectors

Industry59%

Domestic11%

198078 TWH

Industry35%

Domestic22%

Commercial6%

Agri29%

2000313 TWH

Traction 3% Others 5%

Agri17%

Traction 3%

Agri6%

Industry68%

Traction4%

Others5%

Domestic11%

Commercial6%

196012 TWH

Commercial6%

Others 4%

Data Source: CMIE


Energy transition evidences-Changing mix of Electricity Generation

Oil-T hermal

3%

N uclear3%Gas-

T hermal11%

C o al-T hermal

70%

H ydro 13%

C o al T hermal

51%

Oil T hermal 0.02 %

Gas T hermal 0.04%

H ydro45%

N uclear4%

197161 TWH

2001558 TWH

Data Source: CMIE


TransitionsDemand-side Energy

Efficient Appliances

Substitutions (e.g. Information for transport)

Advance Technologies - Fuel-cell

- Hydrogen economy

- Bio-engineering


Energy transition evidences in India:Coal & electricity use in Railways

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1970

-71

1978

-79

1986

-87

1994

-95

2002

-03

Coa

l usa

ge (i

n 10

00 to

ns)

01000

2000300040005000

600070008000

900010000

Elec

tric

ity u

sage

(GW

H)

Data Source: CSO, GoI and Indian Railways annual reports


TransitionsTechnology

Logistics- Pipelines

Electricity T&D- Decentralized utilities

Information- Wireless

Nanotechnology

New and Renewable Energy


Historical cost curves of some technology markets

0

0.1

0.2

0.3

0.4

0.5

0.6

1980 1985 1990 1995 20000

1

2

3

4

5

6

7

1980 1985 1990 1995 2000

0.00

0.02

0.04

0.06

0.08

0.10

0.12

1980 1985 1990 1995 20000.000.020.040.060.080.100.120.140.160.180.20

1980 1985 1990 1995 2000

Wind PV

Biomass Municipal waste


TransitionsEnvironment

Awareness- Pressure groups

Income-effects - E.g. Kuznets phenomenon

Laws and Regulations- Global agreements- National policies

Technology- Zero-effluent Processes- Recycling


TransitionsConsumption &Life-style

Conservation- Substitutions- Recycling

City Planning

Architecture/ Building Codes

Changing Preferences

Income Effects


Transition in Household Energy in India:Fuel-wood to LPG

0

1

1.2

1.4

1.6

1.8

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Inde

x: 1

981=

1

Population

Fuel-wood

production

0

5

10

15

20

2519

81

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Inde

x:19

81=1

LPG consumption in India

Urban

Rural

0

10

20

30

40

50

60

70

80

1981 1984 1987 1990 1993 1996 1999 2002

%

% Household LPG penetration in India

Data Sources - Census 2001, NSS 1994, 2000


Path Dependence: Lock-ins vs. Innovations• Elasticity of long-term paths to short-term influences

• Lock-ins from current technology supply

• SRES Scenarios and Technology paths

• Development policies and path dependence

IPCC SRES Emission Scenarios

0

5

10

15

20

25

30

1990 2010 2030 2050 2070 2090Year

CO

2(G

tC)

A1

A2

B1

B2

WRE550

0

5

10

15

20

25

30

1990 2010 2030 2050 2070 2090Year

CO

2(G

tC)

A1

A2

B1

B2

WRE550

400

600

800

1000

1960 1970 1980 1990

kgC/

toe

ChinaIndia

USA

Japan

France400

600

800

1000

1960 1970 1980 1990

kgC/

toe

ChinaIndia

USA

Japan

France

Decarbonization of Primary Energy: History


Path Dependence• Elasticity of long-term paths to short-term influences

• Lock-ins from current technology supply

• SRES Scenarios and Technology paths

• Development policies and path dependence


Hazards of Disaggregated Scenarios• Shifting comparative advantage

• Path dependence

• Hazards of disaggregated scenarios• High error• Poor benchmark for negotiations


Modeling Endogenous Development Paths


Modeling of Transitions

Scenarios

Dynamics

Databases

Linkages

Purpose


Drivers of technological change

International Labor market• Wage differential • Income gaps• Migration

Human Capital

Knowledge flows• Diasporas and social networks• Shifting comparative advantage in knowledge services• Role of local and contextual knowledge

Governance, risks and investment flows


Drivers of Energy Transitions• Population

– Fertility and Mortality rates– Rural-Urban

• Economic growth– Economic structure changes– Globalization– Income distribution– Urbanization– Rural economic growth

• Energy supply security– Oil price stability– Energy geo-politics– Energy portfolio

• New Energy technologies– Capital costs, – Learning curve, – R&D vs. leapfrogging – Technology transfer


Economic Growth: India

0

10

20

30

40

50

60

70

80

90

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

2100

GD

P in

dex

(200

0=1)

High

Medium

Low

4.5%

4 %

3.5%

100 year CAGR

5.56%

4.91 %

4.71%

50 year CAGR


Population

0

0.5

1

1.5

2

2.5

1950

2000

2050

2100

Popu

latio

n in

bill

ions

High

Medium

Low

Indian Population ScenariosWorld Population (Median Scenario)

0

0.5

1

1.5

2

2.5

1950

1990

2010

2030

2050

Popu

latio

n gr

owth

rate

(%)

0

1

2

3

4

5

6

7

8

9

10

Wor

ld P

opul

atio

n (in

bill

ions

)

1970


Indian Scenarios

Fragmented

IA1

GlobalizationHigh Growth

IA2

Mixed Economy

IB1

Sustainable Development

IB2

Self Reliance

Cen

tral

izat

ion

Dec

entr

a liz

a tio

n

Market integration

Gov

erna

nce

Integrated


Scenarios Storylines: TransitionsScenarios Storylines: Transitions

IB2IB2

• Population: Low growth, specialized skills, high migration

• Urbanization: High, concentrated, vertical cities

• Economy: High growth, global market, competition

• Resources: Old and New Fossil, Biomass, Nuclear, efficient use

• Technologies: Centralized, Global R&D, private IPRs, rapid diffusion, supply-side push

• Environment: Market instruments, high-tech solutions

IA1IA1 IA2IA2

IB1IB1• Population: Medium, diverse skills, two-way migration

• Urbanization: Medium, dispersed, planned

• Economy: Medium growth, diverse goods and services, global market, even development, sustainable consumption

• Resources: Local, renewable, sustainable use

• Technologies: Shared R&D, rapid diffusion, demand-side

• Environment: Mixed instruments, preventive approach, resource conservation, dematerialization, recycling

• Population: High, low skills, restricted migration

• Urbanization: Low, unplanned, dispersed

• Economy: Low growth, local market, control

• Resources: local, inefficient use

• Technologies: Local R&D, weak IPR regime, slow diffusion

• Environment: Command and control instruments, local approach and solutions

• Population: Medium, medium skills, restricted migration

• Urbanization: Medium, concentrated, unplanned

• Economy: Medium growth, regional market, uneven regional development

• Resources: Fossil, local, unsustainable use

• Technologies: Regional R&D, weak IPR regime, slow diffusion

• Environment: Mixed instruments, end-of-pipe solutions


Sector shares in GDP (IA2 Scenario)

Services47%

Industry25%

2000

Agri.28%

Services56%

Agri.18%

Industry26%

Industry28%

Agri.10%

Services62%

2050 2100

Sources: Planning Commission, expert discussion and


Wind Electricity

0

5000

10000

15000

20000

25000

30000

35000

40000

1995 1996 1997 1998 1999 2000 2001 2002 2003

Capa

city (

MW

)

Annual installed capacity Total installed capacity

100

1000

10000

1 100 10000Cumulative Sales (M W)

Progress Ratio 96%

The learning curve

0

500

1000

1500

2000

2500

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Aver

age

capa

city

in K

W

Turbine size

0

2

4

6

8

10

12

1990 1995 2000 2005 2010 2015 2020

-------- bulk pow er competitive price band

Leve

lised

cos

t-cen

ts/k

Wh

Low wind speed sites

High wind speed sites

Projections


Solar Electricity

1

10

100

0.01 0.1 1 10 100 1000 10000Cumulative PV Module Shipment (MW)

Mod

ule

Pric

e (1

994S

/Wp)

Commercialization stage

(1968) $90

(1976) $51

(1998) $3.50

Learning Rate = 20.2%

0

200

400

600

800

1000

1200

1400

1600

2000 2005 2010 2015 2020 2025 2030 2035

[GW]

EPIA Green peace

Cost Projections

0

10

20

30

40

50

60

1975 1980 1985 1990 1995 2000Year

Ave

rage

Mod

ule

Pric

e (1

998

$/W

p) $51.00

$3.50

Cost History


Hydrogen fuel production costs

2.0

2.5

3.0

3.5

4.0

4.5

Natural gasw ithout CO2

capture

Natural gasw ith CO2capture

CoalGasif icationw ithout CO2

capture

CoalGasif icationw ith CO2capture

US

Cen

ts/k

wh


India: CO2 Emissions

2002000

400

600

800

1000

1200

1400

1600

2020 2060 2100

CO

2E

mis

sion

s (M

T)

1800

2040 2080

IA2

IB2

IB1

IA1

IA1T


Technologies in Scenarios: ShortTechnologies in Scenarios: Short--termterm

IA1IA1T

IB2

IB1

IA2

Mill

ion

Ton

of C

O2

Em

issi

ons

800

1600

2400

3200

2000 2010 2020 2030800

1600

2400

3200

2000 2010 2020 2030

Frozen Technology

Road infrastructures, Energy markets

Ultra-critical boilers, IGCC

Building insulations, Appliance standards

Gasoline hybrid vehicle, Bio-ethanol

Energy efficiency, Environment markets

Nuclear Fission, Information highways

Fuel cell vehicle: H2 from natural gas

Bikeway, Advanced car sharing system

Renewable energy technologies

Urban planning, Public transport

Virtual communication system

Waste recycling and reuse

Conventional Technology Paths


Technologies in Scenarios: LongTechnologies in Scenarios: Long--termterm

IA1T

IA2

IB2

IB1

2100750

2000

1500

2250

3000

3750

4500

5250

6000

2020 2060

CO

2 E

mis

sion

s (M

illio

n T

on)

6750

2040 2080

IA1

Frozen Technology

Renewable Energy Technologies

High share of renewable Energy

Lifestyle changes, Eco-friendly choices

Sustainable habitats, Public amenities

Dematerialization, material substitutions

Substitution of transport by IT

Conventional Technology Paths Synfuels, Gas hydrates, Nuclear fission

Energy efficient appliances/ infrastrucutre

CO2 Capture/ Storage, pipeline networks

Fuel cell vehicle: Carbon-free hydrogen

Nuclear Fusion, Backstops

Advanced materials, Nanotechnology

Information highways, High speed trains


Modeling Climate Stabilization Induced Development Paths


Stabilization induced technological change

• Depends on the underlying endogenous development path

• Stabilization would induce significant technological change

• How to represent future technologies in models?

• Architecture of climate regime is the key driverAddressing Questions from Negotiators

Allocations of Emissions RightsTaxes and Revenue Recycling Who pays?Technology protocols


Indian Emission Scenarios and Stabilization

2002000

400

600

800

1000

1200

1400

1600

2020 2060 2100

Car

bon

Em

issi

ons (

MT

)1800

2040 2080

550 ppmv550 ppmv

IA2

IB2

IB1

IA1

IA1T


Stabilization in IA2 Scenario: New/ Renewable Technologies

0

100

200

300

400

500

2070 2085 2100

TW

hIA2

550 ppmv

650 ppmv

Nuclear Fusion

0

150

300

450

600

750

1995 2010 2025 2040 2055 2070 2085 2100

TW

h

IA2

550 ppmv

650 ppmv

Renewable Technologies


Stabilization and Biomass Electricity: IA2 Scenario

0

50

100

150

200

250

300

350

1995 2010 2025 2040 2055 2070 2085 2100

TW

h

550 PPMV with emissions trading

Biomass R&D

Renewable R&D Policy

Base (IA2)


Technology CompetitionSolar PV Penetration Carbon Mitigation

0

5

10

15

20

25

30

35

40

1990 2000 2010 2020 2030 2040 2050

Base

High-Solar

$25 TaxMed-Solar + $25 Tax

0%

5%

10%

15%

20%

25%

30%

High Solar $25 Tax Med Sol+ $25 Tax


Per capita CO2 emissions: Burden Sharing Issues

0

1

2

3

4

2000 2020 2040 2060 2080 21000

1

2

3

4

Ton

of C

arbo

n D

ioxi

de/P

erso

n

IA2

IA1

IB2

IB1

Indian Scenarios IPCC A2

Ton

of C

arbo

n D

ioxi

de/P

erso

n

0

3

6

9

12

18

1990 2010 2030 2050 2070 2090

World

Annex II

Annex I excl.Annex I

Non-Annex I (Asia)

Non-Annex I(Rest)

15


Induced Technological Change – IA2 Scenario:550 ppmv CO2 Stabilization in India

0

500

1000

1500

2000

2500

1990 2005 2020 2035 2050 2065 2080 2095

Carbon CaptureEnergy EfficiencyWindSolarBiomassHydroNuclearGasOilIndia 550 ppmv emission

550 PPMV550 PPMV 400

800

1200

2000

1600

Ton of C


Aligning Development and Climate Policies

• Aligning endogenous and induced change

• Co-benefits

• Spillovers


Co-benefits of CO2 & SO2 Mitigation: India B2 Scenario

Carbon Emissions SO2 Emissions

0

200

400

600

800

1995 2005 2015 2025 2035Year

Car

bon

(MT)

Year

Mill

ion

Tonn

es

0

1

2

3

4

5

6

1995 2005 2015 2025 2035

7


South-Asia Regional Energy Market


Benefits from South-Asia Energy Cooperation

(Cumulative from 2010 to 2030)

Benefit (Saving)

$ Billion % of Region's GDP

Energy (Direct Benefits)

Energy 60 Exa Joule 180 0.48 Investment in Energy Supply Technologies

72 0.19

Investment in Energy Demand Technologies

69 0.18

Environment (Indirect Benefits) Carbon 1.4 Billion Ton 28 0.08 Sulfur Dioxide (SO2) 50 Million Ton 10 0.03

Total Direct and Indirect Benefits 359 0.98 Spillover Benefits

Water 16 GW additional hydro capacity Flood Control From additional dams Competitiveness Reduced unit energy/electricity cost


Development, Climate and Technology Frontier


Aligning Development and Climate: Technology Innovations

Climate Quality

Technology Innovations

Nat

iona

l Eco

nom

ic T

arge

ts

Climate Quality

Econ

omic

/soc

ial I

ndic

ator


ConclusionsRealistic representation of development processes in models

Scenarios should represent transitions

Aligned development (endogenous change) and climate (induced change) policies


Project Website: www.e2models.com


APEIS & CAPaBLE Project Interface

ProjectIntegrated Assessment Model for Developing Countries and Analysis of Mitigation Options and

Sustainable Development Opportunities

APEIS Session was held at the CAPaBLE Workshop at AIT, Bangkok in August 2004 and at ERI Beijing n September 2005


Thank you

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