0
3rd IIASA-TITECH Technical Meeting
               21st – 22nd September 2003, Vienna
      Center for the Management of En...
Overview
     – Reminder of REXS model
             • Historical trends in resource use
                – Energy Intensity...
Reminder of REXS economic output
             module (ICT components optional)
               Exe rgy
                    ...
Common practice

             Y t = Q ( A t , H t K t , G t L t , F t R t ),
             Y t = A t (H t K t ) (G t L t ) ...
The production function can be either CD, o
        LINEX
                       L + U         L 
          Yt = U...
The Virtuous Cycle driving Historical Growth



                    Product                R&D Substitution of
           ...
Output – validation of full model for the US
                                                      Simulated and empirical...
Trend of “Dematerialisation” – a constraint
             on future productivity ?
                                       S...
Aggregate conversion efficiencies have improved
                   significantly but are they slowing?
                   ...
Could the future rate of technical efficiency
             growth also be a constraint?
                                  ...
REXS Projections of future output
         PROJECTIONS A
         Altering the future rates of the energy
         intensi...
Trends in technical efficiency for other
             countries
                                   Aggregate conversion ef...
Possible trajectories for future technical efficiency (US)
                                        P o s s ib le t r a je ...
Forecast Gross Output (GDP), US 2000-2050
                       Forecast Gross Output REXS F US100
   45        Simulatio...
Marginal productivity of exergy services (work)
           Graph for Marginal Productivity of Exergy Services
  1
        ...
Marginal productivity of capital
                  Graph for Marginal Productivity of Capital
0.04
                       ...
Marginal productivity of labour
                 Graph for Marginal Productivity of Labour
 0.6                           ...
US “Dematerialisation” forecasts #1
                                                             dmat_sens
Empirical Data ...
US “Dematerialisation” forecasts #2
Empirical Data                                                    Empirical Data
25%  ...
US “Dematerialisation” forecasts #3
                                                                   dmat_sens
Empirical...
Exergy Service Breakdown Comparison of Japan and US
                    F r a c tio n s o f fo s s il fu e l e x e r g y a...
REXS-F: Japan Forecasts #1
         Forecast Technical Efficiency REXS F US100
  0.4



  0.2



     0
      1960     197...
REXS-F: Japan Forecasts #2
               Forecast Gross Output REXS F US100
  15



 7.5



    0
     1960             1...
REXS-F: Japan Forecasts #3
             MP of labour (V2 - Slow technical efficiency growth)
              1



          ...
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Warr 3rd Iiasa Titech Technical Meeting

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Resource EXergy Services Forecasts REXS-F using an economic forecasting model with quasi-logistic technical progress.

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  1. 1. 3rd IIASA-TITECH Technical Meeting 21st – 22nd September 2003, Vienna Center for the Management of Environmental and Social Responsibility (CMER) INSEAD Boulevard de Constance Fontainebleau 77300 http://benjamin.warr.free.fr Resource EXergy Services Forecasts REXS-F An economic forecasting model with quasi-logistic technical progress 28/04/2003 1
  2. 2. 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 28/04/2003 2
  3. 3. Reminder of REXS economic output module (ICT components optional) Exe rgy Labour Capital Serv ice s Linex parameter a ICT Fraction of Gross Output Capital Linex parameter b ICT Capital Linex Growth Rate Parameter c Cumulativ e Production Monetary Monetary Output 28/04/2003 3
  4. 4. Common practice Y t = Q ( A t , H t K t , G t L t , F t R t ), Y t = A t (H t K t ) (G t L t ) (F t R t ) α β γ 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 28/04/2003 4
  5. 5. The production function can be either CD, o LINEX    L + U   L  Yt = U expa 2 −     + ab − 1    K   U  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 28/04/2003 5
  6. 6. The Virtuous Cycle driving Historical Growth Product R&D Substitution of Improvement Knowledge for Labour; Capital; and Exergy Process Improvement Substitution of Exergy for Labour Lower Limits to and Capital Costs of INCREASED REVENUES Production Increased Demand for Final Goods and Services Economies of Lower Prices of Scale Materials & Energy 28/04/2003 6
  7. 7. Output – validation of full model for the US Simulated and empirical GDP, USA 1900-2000 25 simulated empirical 20 normalised GDP (1900=1) 15 10 5 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 year 28/04/2003 7
  8. 8. Trend of “Dematerialisation” – a constraint on future productivity ? Simulated and empirical primary exergy intensity of output, USA 1900-2000 1.2 1 0.8 r/y (1900=1) 0.6 0.4 0.2 empirical simulated 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 28/04/2003 8 year
  9. 9. Aggregate conversion efficiencies have improved significantly but are they slowing? 0,18 0,16 0,14 technical efficiency, f 0,12 0,1 0,08 0,06 empirical (U/R)" 0,04 bilogistic model 0,02 0 25 695 1486 2660 4677 7113 cumulative primary exergy production (eJ) 28/04/2003 9 Source Data: Ayres, Ayres and Warr, 2003
  10. 10. Could the future rate of technical efficiency growth also be a constraint? Rate of change of aggregate technical efficiency of primary exergy conversion, USA 1900-2000 0.0025 0.002 rate of change 0.0015 0.001 0.0005 10 yr moving average 0 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 28/04/2003 10 cumulative production (1900=1)
  11. 11. REXS Projections of future output PROJECTIONS A Altering the future rates of the energy intensity of output The 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 B The future growth rate of technical efficiency of exergy conversion is uncertain. We tested 3 alternatives, keeping the ‘demat rate’ at 1.2%s 28/04/2003 11
  12. 12. Trends in technical efficiency for other countries Aggregate conversion efficiency of commercial fuel exergy to useful work,1960-1998 0.30 0.25 0.20 percentage (%) 0.15 0.10 0.05 France Germany Japan UK US 0.00 1960 1965 1970 1975 1980 1985 1990 1995 year 28/04/2003 12
  13. 13. Possible trajectories for future technical efficiency (US) P o s s ib le t r a je c to r ie s o f te c h n ic a l e ffic ie n c y w ith p r im a r y e x e r g y p r o d u c tio n e x p e r ie n c e , U S 1 9 0 0 -2 0 5 0 0 .3 0 d o u b lin g o f e x p e r ie n c e E m p ir ic a l tr e n d f r o m 1900 to 2 0 0 0 a n d c u m u la tiv e p r im a r y e x e r g y p r o d u c tio n h ig h 130% 0 .2 5 m id 120% lo w 115% 0 .2 0 technical efficiency 0 .1 5 P la u s ib le im p r o v e m e n t o n c u rre n t e ffic ie n c y o f 0 .1 0 e x e rg y c o n v e r s io n 0 .0 5 S im u la tio n re s u lts u s in g th e p la u s ib le tra je c to r ie s o f te c h n ic a l e ffic ie n c y g ro w th a s a fu n c tio n o f c u m u la tiv e p r im a ry e x e r g y p r o d u c tio n 0 .0 0 0 2000 4000 6000 8000 10000 12000 14000 28/04/2003 year 13
  14. 14. Forecast Gross Output (GDP), US 2000-2050 Forecast Gross Output REXS F US100 45 Simulation results using HIGH the plausible trajectories of Initial ~3% growth rate, for 130% technical efficiency growth target increase in technical as a function of cumulative efficiency. 33.75 primary exergy production 22.5 MID Initial 1.5% growth rate for target 120% improvement in efficiency. 11.25 LOW Shrinking economy at rate of 2 - 2.5% after 2010 if the target 0 technical efficiency is only 115% 1900 1918 1936 1954 1972 1990 2008 2026 2044 year greater than the current. GDP (1900=1) empirical low mid high 28/04/2003 14
  15. 15. Marginal productivity of exergy services (work) Graph for Marginal Productivity of Exergy Services 1 Increasing marginal productivity of exergy services as technological progress increases. 0.85 Faster rate of marginal productivity growth with slower rates of technological progress. 0.7 Once the economy slows the marginal productivity of capital is negatively affected. 0.55 highest 0.4 1900 1920 1940 1960 1980 2000 2020 2040 Time (Year) Simulation results using Marginal Productivity of Exergy Services : flin04 the plausible trajectories of Marginal Productivity of Exergy Services : flin03 technical efficiency growth Marginal Productivity of Exergy Services : flin02 as a function of cumulative Marginal Productivity of Exergy Services : flin01 Marginal Productivity of Exergy Services : Empirical Data primary exergy production 28/04/2003 15
  16. 16. Marginal productivity of capital Graph for Marginal Productivity of Capital 0.04 Slower growth in the marginal productivity of capital with faster low and mid rates of technological productivity growth -0.02 -0.08 high -0.14 -0.2 1900 1920 1940 1960 1980 2000 2020 2040 Time (Year) Simulation results using Marginal Productivity of Capital : flin04 the plausible trajectories of Marginal Productivity of Capital : flin03 technical efficiency growth Marginal Productivity of Capital : flin02 as a function of cumulative Marginal Productivity of Capital : flin01 Marginal Productivity of Capital : Empirical Data primary exergy production 28/04/2003 16
  17. 17. Marginal productivity of labour Graph for Marginal Productivity of Labour 0.6 Slower decrease in the marginal productivity of labour with faster rate of technological productivity growth 0.45 0.3 0.15 0 1900 1920 1940 1960 1980 2000 2020 2040 Time (Year) Simulation results using the plausible trajectories of Marginal Productivity of Labour : flin04 Marginal Productivity of Labour : flin03 technical efficiency growth Marginal Productivity of Labour : flin02 as a function of cumulative Marginal Productivity of Labour : flin01 primary exergy production Marginal Productivity of Labour : Empirical Data 28/04/2003 17
  18. 18. US “Dematerialisation” forecasts #1 dmat_sens Empirical Data Empirical Data 25% 50% 75% 95% 25% 50% 75% 95% Primary Exergy Intensity of Output Gross Output 2 60 Exergy Intensity of Output Forecast GDP (1900 = 1) (index 1900 = 1) for sensitivity tests varying the "dematerialisation rate" from 1.2 to 1.5% per annum 1.5 45 1 30 0.5 15 0 0 1900 1938 1975 2013 2050 1900 1938 1975 2013 2050 Time (Year) Time (Year) 28/04/2003 18
  19. 19. US “Dematerialisation” forecasts #2 Empirical Data Empirical Data 25% 50% 75% 95% 25% 50% 75% 95% Technical Efficiency of Primary Exergy Conversion Primary Exergy Demand 0.4 8 Technical Efficiency Primary Exergy Demand for sensitivity tests varying (index, 1900=1) the "dematerialisation rate" 0.3 6 from 1.2 to 1.5% per annum 0.2 4 0.1 2 0 0 1900 1938 1975 2013 2050 1900 1938 1975 2013 2050 Time (Year) Time (Year) 28/04/2003 19
  20. 20. US “Dematerialisation” forecasts #3 dmat_sens Empirical Data Empirical Data 25% 50% 75% 95% 25% 50% 75% 95% Marginal Productivity of Labour Marginal Productivity of Capital 0.6 0.04 0.45 -0.02 0.3 -0.08 0.15 -0.14 MP of Labour MP of Capital 0 -0.2 1900 1938 1975 2013 2050 1900 1938 1975 2013 2050 Time (Year) Time (Year) dmat_sens Empirical Data "Dematerialisation" Sensitivity 25% 50% 75% 95% Analysis Marginal Productivity of Exergy Services 1 MP of Exergy Services Varying the "exergy intensity of output" 0.9 reduction rate between 1.2 and 1.5%, using an exponential distribution 0.8 (order: 0, stretch: 0.015), using the parameters for the high trajectory of 0.7 technical efficiency growth. 0.6 1900 1938 1975 2013 2050 Time (Year) 28/04/2003 20
  21. 21. Exergy Service Breakdown Comparison of Japan and US F r a c tio n s o f fo s s il fu e l e x e r g y a p p a r e n t c o n s u m p tio n , Japan 1900-2000 100% E le c tric ity r e m o v e la y e r s t h e n a d d P r im e m o v e r s th e s e o n N o n -fu e l 90% s u c c e s s ively Heat H e a t (U S ) E le c tric ity (U S ) 80% P r im e m o v e r s ( U S ) N o n -fu e l (U S ) 70% 60% 50% 40% 30% 20% 10% 28/04/2003 0% 21
  22. 22. REXS-F: Japan Forecasts #1 Forecast Technical Efficiency REXS F US100 0.4 0.2 0 1960 1978 1996 2014 2032 2050 year empirical v1 v2 v3 28/04/2003 22
  23. 23. REXS-F: Japan Forecasts #2 Forecast Gross Output REXS F US100 15 7.5 0 1960 1978 1996 2014 2032 2050 year empirical v2 v3 Gross Output : v3 28/04/2003 23
  24. 24. REXS-F: Japan Forecasts #3 MP of labour (V2 - Slow technical efficiency growth) 1 0.5 0 1960 1975 1990 2005 2020 2035 2050 year MP of labour (V3 - Fast technical efficiency growth) 1 0.5 0 1960 1975 1990 2005 2020 2035 2050 year Labour 28/04/2003 Capital 24 Exergy Services
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