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Integration of agricultural and energy
system models for biofuel assessment
A. Elobeid, S. Tokgoz, R. Dodder, T. Johnson, ...
www.ifpri.org
Modeling Team
 Amani Elobeid: Center for Agricultural and Rural Development,
Iowa State University
 Simla ...
www.ifpri.org
Motivation
 In the past, crude oil and natural gas markets have
impacted cost of producing and transporting...
www.ifpri.org
Motivation
 As a result of the biofuel expansion, agricultural
production is now being driven by a new set ...
www.ifpri.org
Agriculture - Energy linkages
www.ifpri.org
Objectives
 To set up a coupled modeling framework to capture
the dynamic linkages between agricultural and...
www.ifpri.org
Modeling systems and philosophies
 MARKAL - MARKet ALlocation
 Mixed-integer linear programming model that...
www.ifpri.org
Modeling systems and philosophies
 CARD US agricultural model
• Partial equilibrium, non-spatial, multi-mar...
www.ifpri.org
Modeling systems and philosophies
 CARD US crop model uses variable costs of production
(COP) from a model ...
Comparison of modeling logic
MARKAL
Cannot provide forecasts,
but still can be used for
policy analysis
Least-cost optimiz...
Comparison of modeling logic
MARKAL
Determines what a
rational planner seeking to
minimize total system
costs in all perio...
Relative Strengths
MARKAL
Technological detail for
the LDV fleet (including
penetration of FFVs)
Interactions among all
se...
www.ifpri.org
Integrated MARKAL-CARD modeling framework
 We define
• (a) static variables that could be harmonized across...
www.ifpri.org
Integrated MARKAL-CARD modeling framework
DATA
www.ifpri.org
Integrated MARKAL-CARD modeling framework
 Evaluate “convergence” between two models and
identify “equilibr...
www.ifpri.org
Iteration of Corn Production
0
5,000
10,000
15,000
20,000
25,000
2000 2005 2010 2015 2020 2025
Milliongallon...
www.ifpri.org
Iteration of Corn Production
0
5,000
10,000
15,000
20,000
25,000
2000 2005 2010 2015 2020 2025
Milliongallon...
www.ifpri.org
Iteration of Corn Production
0
5,000
10,000
15,000
20,000
25,000
2000 2005 2010 2015 2020 2025
Milliongallon...
www.ifpri.org
Iteration of Corn Production
0
5,000
10,000
15,000
20,000
25,000
2000 2005 2010 2015 2020 2025
Milliongallon...
www.ifpri.org
Iteration of Corn Prices
Corn Farm Price (CARD annual)
Corn Farm Price (CARD 5 year average)
0.00
0.50
1.00
...
www.ifpri.org
Iteration of Corn Prices
Corn Farm Price (CARD annual)
Corn Farm Price (CARD 5 year average)
0.00
0.50
1.00
...
www.ifpri.org
Iteration of Corn Prices
Corn Farm Price (CARD annual)
Corn Farm Price (CARD 5 year average)
0.00
0.50
1.00
...
www.ifpri.org
Iteration of Corn Prices
Corn Farm Price (CARD annual)
Corn Farm Price (CARD 5 year average)
0.00
0.50
1.00
...
www.ifpri.org
Pre- and post-linkage baseline results in the
CARD model (2020/21)
Initial Baseline
(Coordinated)
Starting P...
www.ifpri.org
Pre- and post-linkage baseline results in the
CARD model (2020/21)
Initial Baseline
(Coordinated)
Starting P...
www.ifpri.org
Micro (Field) - level Modeling
 Link CARD-MARKAL baseline to a field-level, GIS-based
model
 It operates a...
www.ifpri.org
Note: C stands for corn, S for soybeans, 1 is for conventional tillage,
2 for conservation tillage, Sr for s...
www.ifpri.org
Conclusions
 Intensified linkage between energy and agricultural
markets
• through higher input costs to ag...
www.ifpri.org
Conclusions
 Integrated modeling approach better reflects real
world dynamics, where economic agents make
d...
www.ifpri.org
Simla Tokgoz
s.tokgoz@cigar.org
Thank you!
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Integration of agricultural and energy system models for biofuel assessment

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Transcript of "Integration of agricultural and energy system models for biofuel assessment"

  1. 1. Integration of agricultural and energy system models for biofuel assessment A. Elobeid, S. Tokgoz, R. Dodder, T. Johnson, O. Kaplan, L. Kurkalova, S. Secchi Presented by: Simla Tokgoz, Research Fellow International Food Policy Research Institute 1st International Symposium on Energy Challenges and Mechanics July 8, 2014 Aberdeen, Scotland
  2. 2. www.ifpri.org Modeling Team  Amani Elobeid: Center for Agricultural and Rural Development, Iowa State University  Simla Tokgoz: International Food Policy Research Institute  Rebecca Dodder & Ozge Kaplan: National Risk Management Research Laboratory, Office of Research and Development, U.S. Environmental Protection Agency  Tim Johnson: Nicholas School of the Environment, Duke University  Silvia Secchi: Department of Agribusiness Economics, Southern Illinois University  Lyubov Kurkalova: Departments of Economics and Energy and Environmental Systems, North Carolina A&T State University
  3. 3. www.ifpri.org Motivation  In the past, crude oil and natural gas markets have impacted cost of producing and transporting agricultural commodities.  Now, energy prices (gasoline and biodiesel) impact demand for crops used in biofuel production (Tokgoz et al. 2008, Hayes et al 2009 among many).  Plus, supply of biofuels impact price and quantity of fossil fuels (Hochman et al. 2010; Rajagopal et al. 2011; Thompson et al. 2011; Chen, Huang, Khanna 2012).
  4. 4. www.ifpri.org Motivation  As a result of the biofuel expansion, agricultural production is now being driven by a new set of economic incentives, while energy production for transportation purposes is becoming dependent on weather, climate change, growing global demand for food and feed, and other variables that affect agricultural output and prices (Schmidhuber 2007; Delzeit, Britz, and Holm-Muller 2012).  Thus, the examination of the impact of biofuels on agricultural and energy markets should not ignore the interconnectedness between the two sectors.
  5. 5. www.ifpri.org Agriculture - Energy linkages
  6. 6. www.ifpri.org Objectives  To set up a coupled modeling framework to capture the dynamic linkages between agricultural and energy markets, and the environmental impacts resulting from this coupling.  This framework incorporates the interactions between agricultural and energy markets at the macro-level, and the assessment of production practices and environmental impacts at the micro (field)-level.
  7. 7. www.ifpri.org Modeling systems and philosophies  MARKAL - MARKet ALlocation  Mixed-integer linear programming model that solves for the least-cost system-wide solution for meeting end-use energy service demands given primary resources in a given region • Transportation sector includes – Vehicles by fuel type, vehicle class, size, and efficiency • Model system-wide optimization means coordination of fuel mix and vehicle fleet MARKAL
  8. 8. www.ifpri.org Modeling systems and philosophies  CARD US agricultural model • Partial equilibrium, non-spatial, multi-market model • Temperate crops, sugar, biofuels • Behavioral equations for – crop planted and harvested acreage and yields – domestic feed, food, industrial uses – stocks – trade • Model solves for prices that balances supply and demand annually with reduced form equations that mimic trade responses from world markets. CARD
  9. 9. www.ifpri.org Modeling systems and philosophies  CARD US crop model uses variable costs of production (COP) from a model which projects these costs by crop and by region • Linked to CARD agricultural model and MARKAL energy model  COP model uses 3 energy prices from MARKAL • Crude oil, natural gas, electricity
  10. 10. Comparison of modeling logic MARKAL Cannot provide forecasts, but still can be used for policy analysis Least-cost optimization framework that reaches an OPTIMAL solution for the full energy system Time horizon till 2050 (includes future technologies) Provide forward looking projections CARD Provide forward looking projections Market outlook and policy analysis tool Baseline projections based on long-term historical and econometric relationships Time horizon till 2024
  11. 11. Comparison of modeling logic MARKAL Determines what a rational planner seeking to minimize total system costs in all periods should do over the model’s time horizon given technological constraints - no annual optimization You cannot capture profit seeking market behavior of individual agents or sectors CARD Solves for net annual returns to individual producers in each sector/commodity and the least-cost alternative for final consumers You can impose zero profit margins or not, by choice
  12. 12. Relative Strengths MARKAL Technological detail for the LDV fleet (including penetration of FFVs) Interactions among all sectors of the energy system (transportation, residential, commercial, and industrial demand sectors, electric power sector and refineries) CARD Harvested area for the major crops by region and state. Co-products and by- products resulting from the processing of agricultural crops
  13. 13. www.ifpri.org Integrated MARKAL-CARD modeling framework  We define • (a) static variables that could be harmonized across models (biofuel and energy policies, historical and technological data) • (b) variables that could be exchanged iteratively by running the two models • (c) criteria that determine convergence between the two models.  Sensitivity analyses were run to identify those parameters that most affected the individual model results with respect to biofuels, and those parameters were, then, prioritized for inclusion in the data exchanges.
  14. 14. www.ifpri.org Integrated MARKAL-CARD modeling framework DATA
  15. 15. www.ifpri.org Integrated MARKAL-CARD modeling framework  Evaluate “convergence” between two models and identify “equilibrium” when generating a baseline • Update the 2 models iteratively by exchanging dynamic variables to achieve convergence (a “joint” baseline) • 2 conditions were met to decide we reached an equilibrium – Corn ethanol, total ethanol, and biodiesel production projections were the same in both models and stopped changing between iterations – Prices for corn, ethanol, biofuel by-products, biodiesel, soybeans that drive the convergence between 2 models stopped moving with iterations
  16. 16. www.ifpri.org Iteration of Corn Production 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025 Milliongallons Version 1a Corn Ethanol Production (CARD) Corn Ethanol Production (MARKAL) 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025Milliongallons Version 1b
  17. 17. www.ifpri.org Iteration of Corn Production 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025 Milliongallons Version 2a 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025Milliongallons Version 2b Corn Ethanol Production (CARD) Corn Ethanol Production (MARKAL)
  18. 18. www.ifpri.org Iteration of Corn Production 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025 Milliongallons Version 2c 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025Milliongallons Version 2d Corn Ethanol Production (CARD) Corn Ethanol Production (MARKAL)
  19. 19. www.ifpri.org Iteration of Corn Production 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025 Milliongallons Version 3a 0 5,000 10,000 15,000 20,000 25,000 2000 2005 2010 2015 2020 2025Milliongallons Version 3b Corn Ethanol Production (CARD) Corn Ethanol Production (MARKAL)
  20. 20. www.ifpri.org Iteration of Corn Prices Corn Farm Price (CARD annual) Corn Farm Price (CARD 5 year average) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 1a 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 1b
  21. 21. www.ifpri.org Iteration of Corn Prices Corn Farm Price (CARD annual) Corn Farm Price (CARD 5 year average) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 2a 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 2b
  22. 22. www.ifpri.org Iteration of Corn Prices Corn Farm Price (CARD annual) Corn Farm Price (CARD 5 year average) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 2c 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 2d
  23. 23. www.ifpri.org Iteration of Corn Prices Corn Farm Price (CARD annual) Corn Farm Price (CARD 5 year average) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 3a 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2000 2005 2010 2015 2020 2025 US$perbushel Version 3b
  24. 24. www.ifpri.org Pre- and post-linkage baseline results in the CARD model (2020/21) Initial Baseline (Coordinated) Starting Point Post-linkage (Converged) Baseline Corn Soybeans Corn Soybeans Corn Soybeans Production (million bushels) 18,916 3,164 14,793 3,468 15,818 3,349 Domestic use (million bushels) 16,259 2,441 11,860 2,457 13,164 2,416 Fuel alcohol use (million bushels) 8,579 NA 4,619 NA 6,320 NA Exports (million bushels) 2,605 731 2,935 1,017 2,662 939 Farm price ($/bushel) 4.37 10.81 3.92 9.74 4.28 9.96 Variable production expenses ($/acre) 301 140 319 141 320 141
  25. 25. www.ifpri.org Pre- and post-linkage baseline results in the CARD model (2020/21) Initial Baseline (Coordinated) Starting Point Post-linkage (Converged) Baseline Ethanol Ethanol Ethanol Production (million gallons) 37,153 35,712 28,900 From corn 24,618 13,417 18,357 From cellulosic 12,500 22,295 10,543 Domestic disappearance (million gallons) 40,527 38,434 35,572 Conventional 24,500 13,155 12,775 Other advanced ethanol 3,526 2,985 12,255 Cellulosic 12,500 22,295 10,543 Net imports (million gallons) 3,500 2,790 6,741 Unleaded gasoline price, FOB Omaha ($/gallon) 2.71 2.15 2.30 Conventional ethanol price, rack Omaha ($/gallon) 1.69 1.66 1.60
  26. 26. www.ifpri.org Micro (Field) - level Modeling  Link CARD-MARKAL baseline to a field-level, GIS-based model  It operates a spatially explicit 30-meter square grid from USDA NASS remote sensing crop cover maps, and land in CRP program.  Micro model takes input, crop and corn stover prices as exogenous and uses budget analysis to simulate the expected profit-maximizing choices of farmers on each grid unit. MICRO-MODEL
  27. 27. www.ifpri.org Note: C stands for corn, S for soybeans, 1 is for conventional tillage, 2 for conservation tillage, Sr for stover removal and ns for no stover removal. Crop rotations and management practices in Iowa
  28. 28. www.ifpri.org Conclusions  Intensified linkage between energy and agricultural markets • through higher input costs to agricultural production • through use of agricultural feedstocks as addition to or replacement of transportation fuels • through impact of biofuels on price of transportation fuels  Integration of both systems’ models need to be utilized to correctly assess the recent transformation
  29. 29. www.ifpri.org Conclusions  Integrated modeling approach better reflects real world dynamics, where economic agents make decisions based on multiple factors and where all markets interact with each other.  Specifically, analyzing the impacts of biofuels expansion using energy systems and agricultural markets models in isolation would lead to overestimation or underestimation of these impacts. To better assess the changes brought about by biofuels, both systems models need to be utilized.
  30. 30. www.ifpri.org Simla Tokgoz s.tokgoz@cigar.org Thank you!

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