SESSION 1: Rob Dellink, OECD_ Land Water Energy Nexus - CIRCLE workshop Oct. 2014

1. THE LAND-WATER-ENERGY NEXUS:
CONSEQUENCES FOR ECONOMIC GROWTH
Rob Dellink
Environment Directorate, OECD
CIRCLE Ad-hoc expert workshop
Paris, 2 October 2014

2. • Soft-linking different models
– Using the output of one model as input to another
– Using a common baseline so models all share the same set of
underlying common drivers (plus a set of model-specific drivers)
– Harmonise on other elements in the scenario storyline where
possible
• Staged modelling approach
– ENV-Growth provides macroeconomic projections
– ENV-Linkages provides sectoral economic projections and
emissions
– IMAGE provides biophysical impacts and bottlenecks
– Economics feedbacks to ENV-Linkages where possible
2
Linking different modelling tools

3. The first stages of the modelling track
Land-water-energy
nexus:
IMAGE model
suite
Structural economics & environmental pressure:
ENV-Linkages
Macroeconomics:
ENV-Growth
3
Stand-alone
modules for
e.g. natural
resources
Climate change:
ENV-Linkages
climate module
Air pollution:
range of models

4. 4
• Computable General Equilibrium (CGE) model
• Multi-regional, multi-sectoral
• Full description of economies
• All economic activity is part of a closed, linked system
• Simultaneous equilibrium on all markets
• Structural trends, no business cycles
• Dynamics
• Solved iteratively over time (recursive-dynamic)
• Capital vintages
• Link from economy to environment
• Greenhouse gas emissions linked to economic activity
• Other pollutants forthcoming…
• Potential future work on water use?
The ENV-Linkages model
… and back

5. • Make use of the details of the CGE model where possible
– sectoral disaggregation
– explicit production function
– captures both direct and indirect effects
– relatively well-established for climate change damages, but for
other environmental challenges the links to economic variables is
much less clear
• Keep separate where needed
– Valuation of non-market damages
5
Incorporating feedbacks into a general
equilibrium model

6. 6
Linking IMAGE output to ENV-Linkages
• The direct impacts are included in the IMAGE model
• ENV-Linkages calculates macroeconomic costs, which
includes indirect impacts
Impacts on
economic
growth
Indirect impacts
Direct
impact
Sector
Agricul-ture
Changes
in crop
product-ivity
Changes
in crop
prices
Changes in food prices
Changes in trade specialization
of agriculture / food products
Changes in prices and demands
of other goods
Changes in household income
and government revenues
…
Change
in GDP
Change
in
welfare

7. THANK YOU!
For more information:
www.oecd.org/environment/CIRCLE.htm
www.oecd.org/environment/modelling
rob.dellink@oecd.org