warr 3rd iiasa titech technical meeting

28/04/2003 1

3rd IIASA-TITECH Technical Meeting21st – 22nd September 2003, Vienna

Center for the Management of Environmental and Social Responsibility (CMER)INSEAD

Boulevard de ConstanceFontainebleau

77300http://benjamin.warr.free.fr

Resource EXergy Services ForecastsREXS-F

An economic forecasting model with quasi-logistic technical progress

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Overview

– Reminder of REXS model• Historical trends in resource use

– Energy Intensity– Conversion Efficiency,

and economic output.

– Forecasts of output varying future trends of• Energy Intensity• Conversion Efficiency,

for JAPAN and the US

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Reminder of REXS economic output module (ICT components optional)

CumulativeProductionMonetaryMonetary

Output

Gross Output

Labour Capital

Linexparameter a

Linexparameter b

ExergyServ ices

ICT Fraction ofCapital

LinexParameter c

ICT CapitalGrowth Rate

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Common practice

Yt is output at time t, given by Q a function of,• Kt , Lt , Rt inputs of capital, labour and natural

resource services.• α, + β + γ = 1, (constant returns to scale assumption)

• At is total factor productivity• Ht , Gt and Ft coefficients of factor quality

( )( ) ( ) ( )γβα

tttttttt

tttttttt

RFLGKHAY

RFLGKHAQY

=

= ,,,,

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The production function can be either CD, or LINEX

For the US a = 0.12, b = 3.4 (2.7 for Japan)Corresponds to Y = K0.38 L0.08 U 0.56

• At ‘total factor productivity’ is REMOVED• Resources (Energy & Materials) replaced by

WORK• Ft = energy-to-work conversion efficiency• Factors ARE MUTUALLY DEPENDENT• Empirical elasticities DO NOT EQUAL COST

SHARE

−+

+

−= 12expUL

abK

ULaUYt

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The Virtuous Cycle driving Historical Growth

Lower Prices ofMaterials &

Energy

INCREASED REVENUESIncreased Demand for

Final Goods and Services

R&D Substitution ofKnowledge for Labour;

Capital; and Exergy

ProductImprovement

Substitution ofExergy for Labour

and Capital

ProcessImprovement

Lower Limits toCosts of

Production

Economies ofScale

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Output – validation of full model for the USSimulated and empirical GDP, USA 1900-2000

0

5

10

15

20

25

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

year

norm

alis

ed G

DP

(190

0=1)

simulated

empirical

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Trend of “Dematerialisation” – a constrainton future productivity ?

Simulated and empirical primary exergy intensity of output, USA 1900-2000

0

0.2

0.4

0.6

0.8

1

1.2

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

year

r/y

(190

0=1)

empirical

simulated

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Aggregate conversion efficiencies have improved significantly but are they slowing?

0

0,02

0,04

0,06

0,08

0,1

0,12

0,14

0,16

0,18

25 695 1486 2660 4677 7113

cumulative primary exergy production (eJ)

tech

nic

al

eff

icie

ncy

, f

empirical (U/R)"

bilogistic model

Source Data: Ayres, Ayres and Warr, 2003

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Could the future rate of technical efficiency growth also be a constraint?

Rate of change of aggregate technical efficiencyof primary exergy conversion, USA 1900-2000

0

0.0005

0.001

0.0015

0.002

0.0025

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

cumulative production (1900=1)

rate

of c

hang

e

10 yr moving average

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REXS Projections of future outputPROJECTIONS AAltering the future rates of the energy intensity of outputThe average decay rate of the exergy intensity of output (R/GDP) for the period 1900-1998 is 1.2% The simulations involved increasing or decreasing this parameter from 1998 onwards, while keeping the values of all other parameters fixed.PROJECTIONS BThe future growth rate of technical efficiency of exergy conversion is uncertain. We tested 3 alternatives, keeping the ‘demat rate’ at 1.2%s

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Trends in technical efficiency for other countries

Aggregate conversion efficiency of commercial fuel exergy to useful work,1960-1998

0.00

0.05

0.10

0.15

0.20

0.25

0.30

1960 1965 1970 1975 1980 1985 1990 1995

year

per

cen

tag

e (%

)

France Germany Japan UK US

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Possible trajectories for future technical efficiency (US)

P o s s i b l e t r a j e c t o r i e s o f t e c h n i c a l e f f i c i e n c y w i t h p r i m a r y e x e r g y p r o d u c t i o n e x p e r i e n c e , U S 1 9 0 0 - 2 0 5 0

0 . 0 0

0 . 0 5

0 . 1 0

0 . 1 5

0 . 2 0

0 . 2 5

0 . 3 0

0 2 0 0 0 4 0 0 0 6 0 0 0 8 0 0 0 1 0 0 0 0 1 2 0 0 0 1 4 0 0 0

y e a r

tech

nic

al e

ffic

ien

cy

h i g h

m i d

l o w

E m p i r i c a l t r e n d f r o m 1 9 0 0 t o 2 0 0 0

d o u b l i n g o f e x p e r i e n c e a n d c u m u l a t i v e p r i m a r y e x e r g y p r o d u c t i o n

1 3 0 %

1 2 0 %

1 1 5 %

P l a u s i b l ei m p r o v e m e n t o n c u r r e n t e f f i c i e n c y o f e x e r g y c o n v e r s i o n

S i m u l a t i o n r e s u l t s u s i n g t h e p l a u s i b l e t r a j e c t o r i e s o f t e c h n i c a l e f f i c i e n c y g r o w t h a s a f u n c t i o n o f c u m u l a t i v e p r i m a r y e x e r g y p r o d u c t i o n

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Forecast Gross Output (GDP), US 2000-2050

Forecast Gross Output REXS F US100

45

33.75

22.5

11.25

01900 1918 1936 1954 1972 1990 2008 2026 2044

year

empiricallowmidhigh

Simulation results using the plausible trajectories of technical efficiency growth as a function of cumulative primary exergy production

GDP (1900=1)

HIGHInitial ~3% growth rate, for 130% target increase in technical efficiency.

MIDInitial 1.5% growth rate for target120% improvement in efficiency.

LOWShrinking economy at rate of 2 - 2.5% after 2010 if the target technical efficiency is only 115% greater than the current.

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Marginal productivity of exergy services (work)

highest

Graph for Marginal Productivity of Exergy Services

1

0.85

0.7

0.55

0.41900 1920 1940 1960 1980 2000 2020 2040

Time (Year)

Marginal Productivity of Exergy Services : flin04Marginal Productivity of Exergy Services : flin03Marginal Productivity of Exergy Services : flin02Marginal Productivity of Exergy Services : flin01Marginal Productivity of Exergy Services : Empirical Data

Increasing marginal productivity of exergy services as technological progress increases.

Faster rate of marginal productivity growth with slower ratesof technological progress.

Once the economy slows the marginal productivity of capitalis negatively affected.


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Marginal productivity of capitalGraph for Marginal Productivity of Capital

0.04

-0.02

-0.08

-0.14

-0.21900 1920 1940 1960 1980 2000 2020 2040

Time (Year)

Marginal Productivity of Capital : flin04Marginal Productivity of Capital : flin03Marginal Productivity of Capital : flin02Marginal Productivity of Capital : flin01Marginal Productivity of Capital : Empirical Data

Slower growth in the marginal productivity of capital with faster rates of technological productivity growth


low and mid

high

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Marginal productivity of labourGraph for Marginal Productivity of Labour

0.6

0.45

0.3

0.15

01900 1920 1940 1960 1980 2000 2020 2040

Time (Year)

Marginal Productivity of Labour : flin04Marginal Productivity of Labour : flin03Marginal Productivity of Labour : flin02Marginal Productivity of Labour : flin01Marginal Productivity of Labour : Empirical Data


Slower decrease in the marginal productivity of labour with faster rate of technological productivity growth

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US “Dematerialisation” forecasts #1Empirical Data25% 50% 75% 95%

Primary Exergy Intensity of Output2

1.5

1

0.5

01900 1938 1975 2013 2050

Time (Year)

dmat_sensEmpirical Data25% 50% 75% 95%

Gross Output60

45

30

15

01900 1938 1975 2013 2050

Time (Year)

Exergy Intensity of Output(index 1900 = 1)

Forecast GDP (1900 = 1)for sensitivity tests varying the "dematerialisation rate" from 1.2 to 1.5% per annum

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US “Dematerialisation” forecasts #2Empirical Data25% 50% 75% 95%

Technical Efficiency of Primary Exergy Conversion0.4

0.3

0.2

0.1

01900 1938 1975 2013 2050

Time (Year)

Empirical Data25% 50% 75% 95%

Primary Exergy Demand8

6

4

2

01900 1938 1975 2013 2050

Time (Year)

Technical Efficiency Primary Exergy Demand(index, 1900=1)for sensitivity tests varying

the "dematerialisation rate" from 1.2 to 1.5% per annum

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US “Dematerialisation” forecasts #3

"Dematerialisation" Sensitivity Analysis

Varying the "exergy intensity of output" reduction rate between 1.2 and 1.5%, using an exponential distribution (order: 0, stretch: 0.015), using the parameters for the high trajectory of technical efficiency growth.

Empirical Data25% 50% 75% 95%

Marginal Productivity of Labour0.6

0.45

0.3

0.15

01900 1938 1975 2013 2050

Time (Year)

MP of Labour


Marginal Productivity of Capital0.04

-0.02

-0.08

-0.14

-0.21900 1938 1975 2013 2050

Time (Year)

MP of Capital


Marginal Productivity of Exergy Services1

0.9

0.8

0.7

0.61900 1938 1975 2013 2050

Time (Year)

MP of Exergy Services

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Exergy Service Breakdown Comparison of Japan and USF r a c t io n s o f fo s s i l fu e l e x e r g y a p p a r e n t c o n s u m p t io n ,

J a p a n 1 9 0 0 - 2 0 0 0

0 %

1 0 %

2 0 %

3 0 %

4 0 %

5 0 %

6 0 %

7 0 %

8 0 %

9 0 %

1 0 0 %

1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0

E le c t r ic i tyP r im e m o v e r sN o n - fu e lH e a tH e a t (U S )E le c t r ic i ty (U S )P r im e m o v e r s ( U S )N o n - fu e l (U S )

r e m o v e la y e r s t h e n a d d th e s e o n s u c c e s s i v e l y

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REXS-F: Japan Forecasts #1

Forecast Technical Efficiency REXS F US100

0.4

0.2

01960 1978 1996 2014 2032 2050

year

empiricalv1v2v3

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Forecast Gross Output REXS F US100

15

7.5

01960 1978 1996 2014 2032 2050

year

empiricalv2v3Gross Output : v3

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MP of labour (V3 - Fast technical efficiency growth)

1

0.5

01960 1975 1990 2005 2020 2035 2050

year

LabourCapitalExergy Services

MP of labour (V2 - Slow technical efficiency growth)

1

0.5

01960 1975 1990 2005 2020 2035 2050

year

warr 3rd iiasa titech technical meeting

Technology