Modelling Green Economy using SD


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This my presentation in the 2nd International Workshop System Modelling and Simulation for Policy Development.

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  • Renewable energy promises to open up new industrial sector that could be growing differently that current energy industry. The new industry promises to create “Green Jobs”, attracting “Green Investment” and developing “Green Market” which in the end develop Green Economy.Palm-Oil Based Biodiesel Industry could served as a learning model for development renewable industry based on crops. Since the maturity and industrial scale of palm oil industry is evident with Indonesia is the top producers of palm oil in the world and 2nd exporters of palm oil after malaysia, due to high local demand. Comparing to other biodiesel crops, such as Jathropa, which has not yet enter an industrial scale. The important thing for modeler regarding palm oil biodiesel is because there is common market price and market mechanism exist to measure the feasibility of an industry. Jathropa and other crops stil do not have a common market price and mechanism. Technological Capability for the 1st generation production of biofuels is also widely available. The 2nd Generation of Biofuels Technology has promises to have better net energy with less impacts, however it is not yet available at an industrial scale.
  • Of course, there are challenges in developing renewable energy on crops, that encompasses at least 4 sectors shown on the slide. In the Social aspects for example: a debate still exist on whether the use of palm oil as an energy sources will push up the prices of foods. In the environment for example: the increase CO2 emission due to poor land management.Therefore, the discussion of renewable energy must account at least these 4 sectors, Economy, Social, Environment and Energy.
  • Indonesia has committed to reduce CO2e emission by adopting REDD+ mechanism as part of indonesia’s strategy of 4P’s Pro Poor, Pro Growth, Pro Jobs and Pro Environment, that set a target to reduce CO2e emission in 2020 by 26% (or 41% at best case scenario) from the current projected path. All of this without compromising the economic growth of 7% yearly.There are three strategic programs: sustainable land management,economic system of sustainable natural resources utilization, andconservation-rehabilitation of forest.
  • There are conflicting views regarding the impacts of REDD+ Impacts to the Indonesian Economy as a whole, and to the palm oil biodiesel industry, in perticular.The Brown Economy way believes REDD+ will slow the economic growth of Indonesia, for example due to the contribution of palm oil export to the economy. Especially with the 1st order of business is the halting for expansion of land use from forest area. However, the green economy way believes that this is not the future views, REDD+ along with other initiatives would continuously and sustainably support the economic growth. This is reflected to the green economy definitions from UNEP: “improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities”
  • Green economy believes that the the growth of the economic capital that consumes the social capital and the environment capital must return back by investing in social capital and environment capital. With the investment, social capitan would develop awareness to conserve the environment and the environment could support the increase of quality of life in the social capital.We will based our model with this interaction model.
  • These perspective of sustainability is also adopted in the green economy framework. Similar to the sustainable development, the conceptual overview of the interaction between natural capital and the economy is added with the measurement of green economy.
  • In a simpler terms, can we putOf course, for those of you who are system dynamics or
  • Ross, in his paper, highlights 3 challenges for modeling renewable energe: local limitation, limited available documentation on large scale implementation of renewable energy and how renewable energy usually is a by product from a non-energy industry, which bears a different characteristics
  • Therefore our on going research aims to answer these questions:Can we have sustainable palm-oil biodiesel production that satisfy REDD+?Can the promise of green jobs and green investments from the renewable energy industry be delivered?Can we analyse the competition of Food vs Fuel vs Forest for land area?At What Cost?
  • Model Conceptualization starts with government as the problem owner. In modeling, the perspective of user is important since this would be the boundaries of model development. The boundaries are the instrument of what the user will do and the key outputs that the user requires to make decisions. The instrument is categorized by redd+ policy alternatives and energy policy alternatives. And the key output was derived from REDD+ Targets, Biodiesel Targets and Green Economy. Of course, user perspectives will also be influenced by other stakeholders, which will reflected in the key outputs.The systems processes will consist of national sustainable interactions with expanding sub-models of biodiesel energy production and forest land use change sub-models. In order for the systems to operate we need an exogenous inputs.
  • Of course, we have options on what methods could fit to answer the questions, based on the problem descriptors and the model typology.
  • Renewable Energy with Sustainability Modeling is characterized by long term and multi dimensional analysis.Based on the charactistic of the problem, systems dynamic is selected.
  • We begin the model construction based on the conceptual model by developing a national sustainable development model based on the T21 System Dynamics Model. T21 Model is a well known open model that models the interaction of national sustainable development. We are using the Indonesian Data to create the model and changed the modeling tools from Vensim to Powersim. We then created an energy aspects with palm oil biodiesel sub-model and expanded the forest sub-model.
  • Biodiesel Production chain was simplified into 3 primary chains: Plantation, CPO Production, and Biodiesel Production. Tha chain is represented by 2 primary flows, the information flow and the materials flow. The social impacts is derived from the information flow which is essentially a financial flow, and the environmental impacts is derived from material flow using Lifec Cycle Analysis Calculation.
  • The forest sub-models is a collection of various type of forest that holds the carbon stocks and will be consumed and conserve depending on the policy. The forest sub-model also holds the green economy measurement module.
  • To select the key outputs for analysis we are using the 3 simplified theme of green economy: socially inclusive, low carbon and resource efficiency. Our current targets in the model would be … for resource efficiency, … for socially inclusive, … for low carbon.
  • We also developed an integrated decision board to serve as the primary interface by linking the model with excel spreadsheet software. If the time permits, we will try to demo our draft model
  • In scenario development methodology, we understand that there are so many scenario development approach that we could use. Of course we will use modeling approach to be use as a what-if and exploring using desk research for now.
  • These are the temporary scenarios and variables values that we have planned for the model. In general there are 3 main scenarios and with probably couple of sub-scenarios based on the main scenarios. We also identified variables in the model that we would like to change. For example, whether or not the government would achieve the renewable energy mix in 2025, which includes not just biodiesel, but other renewables especially for electricity sectors.
  • Again we are sorry that we have not yet able to present to you any simulation results from our model, however based on our understanding while developing the model, there are 3 policy implications that we have identified.My team is currently also developing the model for analysing Jakarta’s sustainable development. Our primary sources of data is a yearly publications of jakarta statistics entitled: Jakarta in Numbers, however these statistics that were financed by state budget, does not includes environmental statistics. We currently trying to influence the Jakarta policy makers to start collecting new data by adding extra budget for tools investment and gathering of new data. It is important to have a shared responsibilities to gather data between national and local level. It is also important to have “standards” of data gathering methods and presentations.The new category of land or industry is another step that related to new data. “What being measured, is what get done” is true. New category would focus the interest to gather more data and analysis.And last but not least, with so many dimensions, sectors, actors in the renewable, an integrated approach at the correct level of government is needed. It is also important the knowledge of creating and implementing the strategy is continuously collected and maintained within the government.
  • Berikut adalah peta mental model berupa causal loop diagram dari rantai produksi yang menunjukkan berbagai mekanisme umpan balik yang terjadi pada 3 rantai produksi biodiesel
  • Mental model pembangunan berkelanjutan juga dirancang ulang, dengan memasukkan unsur biodiesel yang berkontribusi secara lengkap dalam 3 aspek berkelanjutan serta aspek energi
  • Model sistem dinamis mikro yang terdiri dari lebih dari 500 variabel dapat disederhanakan pada gambar berikutRantai Produksi Biodiesel disederhanakan menjadi 3 rantai utama, yaitu perkebunan, pabrik CPO dan pabrik biodiesel.Model disusun dengan pembagian menjadi 2 bagian utama yaitu material flow dan information flow. Information flow pada dasarnya adalah aliran finansial.Environmental impact diambil dari pergerakan material sedangkan variabel sosial diambil dari pergerakan informasi
  • Modelling Green Economy using SD

    1. 1. The 2nd International Workshop onSystem Modelling and Simulation for Policy DevelopmentModeling the impacts of Indonesia’s REDD+Initiatives to the Biodiesel Targets inthe Green Economy Frameworkusing System DynamicsModelers PerspectivesAkhmad Hidayatno | Engineering, Modeling and Simulation LabIndustrial Engineering, Universitas 1
    2. 2. Renewable Energy as An Industrial Perspective willcreates new industrial sector… with palm-oil biodiesel as a learning model Green Government Regulations Economy UU 30/2007, Inpres 1/2006, Permen ESDM 32/2008 Maturity of Supporting Green Market Industry Green Jobs Market New Mechanism Public and Renewable (Price, Private Energy Demand, Investment Indusry Structure) Production and Technology Capability (1st Generation ) 2
    3. 3. There are opportunities. However, there are also challenged byperceived negative impacts on developing palm oil biodiesel • Industrial Value Adding • Unattractive Investment • No new infrastructure Economy Biodiesel comparing to Gas • Employment • Exclusiveness Access to Land• Development of Rural Areas Social • Food vs Fuel Debate • Better Fuel Emission • Increased CO2 due to • Improved Carbon Capture Environment reduction of forest • Threat to biodiversity •Better Energy Mix • Multi-Actors along the •Renewable Energy Energy production chain Industry 3
    4. 4. Indonesia has Committed to Reduce CO2e Emission byAdopting REDD+ Mechanism sustainable land management Reduction of CO2e economic system with sustainable 26% in 2020 utilization of natural-resources (or 41% at best case scenario), with steady economic growth of conservation- 7% yearly. rehabilitation of forest *Strategic Programs from Draft Strategy of REDD+ (Reduction of Emission through Deforestation and Forest Degradation) 4
    5. 5. Perspectives on REDD+ Impacts to the Indonesian Economy… and to palm-oil biodiesel industry REDD+ will slow the economic growth of development countries (The Old Brown Economy Way) REDD+ will drive the economic growth of development countries in a more sustainable way (Green Economy Way) Green Economy: “improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities” (UNEP 2010)
    6. 6. Sustainable Development Concepts as basic ideas ofGreen Economy Framework Economic Productive Labor, Consumption Capital Social Infrastruktur, Capital Health, Bangunan, Productivity Alat-alat Produksi, dsb Jobs, Income Conservation Investment Quality of Life Environm ent Natural Capital resources, Flora dan fauna, Conservation Pollution Water, air, Awareness and Absorption Minerals Movements Energy Renewable and Non-Renewable 6
    7. 7. Modeler Perspective on Green Economy:Conceptual Overview of the Nature-Economy System (UNEP) Natural Ecosystem Natural Ecosystems Capital Services Stocks Goods Value of Natural Value of Total Factor Capital Ecosystem goods Productivity Intangible Social Value of Natural Capital Production Capital Practices Net contribution Labor of nature GDP Green GDP
    8. 8. Modeler Perspective on Green Economy (2)• Modeling the brown economy with green indicators: putting price to what used to be free• It is an economic growth models link to social and environment: how deep the linkage will go is the challenging part• SD Modeling Perspectives – what archetypes?: – Is sustainable growth = putting “limits of growth”? – Can we avoid “tragedy of the commons”? – Can we avoid REDD+ to become “fixes that fails”? – Will Renewable Energy Targets = Drifting Goals? 8
    9. 9. Modeler Perspective on Green Economy (3)Renewable Energy Modeling has more challenges Different Local Large Scale 1 Limitations 2 Documentation 3 Characteristics of Industry Unique local conditions will Very limited open Renewable Energy limit the use of generic model. documentation is available Production has different For example: Indonesia as an on implementing renewable characteristics that the Archipelago, multi social energy in a large (national) energy production. Deep values, etc. scale understanding of non- energy industry works is needed (foresty, agriculture, manufacturing etc.) A more integrated, well-documented and adapted approach is needed to manage renewable energy industry*A. Ross and C. Rakos, The limits of modeling. Experiences with bioenergy in practice - could models have predicted this outcome.Biomass and Bioenergy, 2000. 18: p. 331-340.
    10. 10. REDD+, Green Economy and Palm-Oil Biodiesel Industry offersinteractive dynamics of trade-offs• Can we have sustainable palm-oil biodiesel production that satisfy REDD+?• Can the promise of green jobs and green investments from the renewable energy industry be delivered?• Can we analyse the competition of Food vs Fuel vs Forest for land area?• At What Cost? Land Allocation 10
    11. 11. Model Conceptualization REDD+ Policy Alternatives Energy Policy Alternatives Facilitating Allocate Government Freeing Price Quantity Markets Property Rights Corporations Markets Regulations Regulations (Legalize) Matching Tariffs Subsidies Tax Credits Energy & Grants Resources State Enterprise OUTPUT INPUT National Sustainability Model – Systems Dynamics Model based on T21 Sustainability Output SME Performance Expected ForestryBasic External ROW Economic Factors government Economic Growth Agriculture (Inflation, education Exchange Rates, etc) poverty households Trade Poverty Level health Total Luas infrastructure Environment investment CO2 Emission Reduction Lahan Problem Owner: Targets CER/VER Potensial Government Industry population production Biodiesel Volume Target Science and Grants Achieved Technology labor technology Problem Owner Goals: Fulfillment of the short- Finance Basic Social water energy term and long-term of (Population national biofuel usage GreenGrowth Rate, land Local Economy and etc) emissions Governments Sustainability Module Forest Palm CPO Biodiesel Biodiesel Land Use Plantation Producer Producer Usage Change Stakeholders Module Biodiesel Industry Sub-Model (Biodisel Producers, PERTAMINA, Palm Oil Industry, Consumers, NGOs, Donors, Carbon Market) 11
    12. 12. Modeling Topology: Matching Problems with models Problem descriptors Model typology Time horizon, responsible authority Strategic-operational Degree or direction of change Qualitative-quantitative Ongoing or intermittent Continuous-discrete Inherent system memory or not Dynamic-static Where or when or both Spatial-temporal Why or if Deterministic-stochastic Availability of data Data rich-data poor Knowledge rich or knowledge poor White box – black box Modeling Tools, Methology and Approach System Dynamics Regression analysis Network-based modelling Statistical/Mathematical models Agent-based modelling Expert systems Cost-benefit analysis Discrete modelling Spreadsheet modelling Physical systems modelling Multi-Approach models GIS-based models 12
    13. 13. Renewable Energy with Sustainability Modeling ischaracterized by long term and multi dimensional analysis… system dynamic is selected Optimization (Max/Min) What If-s Scenario Sustainability Focus Environment Analysis Multi Source Energy Single Source Energy World Country Sectors or County Scale of Analysis Short Medium Long Time Analysis 13
    14. 14. National Sustainable Development Model based onT21 Millennium Group Model National Sustainable Development Model Sustainability Impact Macro Sub-Model Sustainable Socio- Tech Environment Module Indicators Module GHG Climate Forest Water Household Emission Change Social Life Expectancy Income Economy Distribution Economic Module Environ- Production Government Population ment Inco Exp Balan Agri Serv Ind Technology me end ce Energy Mix Relative International Investment Employment Prices Trade Biodiesel Volume Energy Module Oil Energy Demand Palm Oil Explora National Transp Biodiesel Prod Residential Serv Ind tion Price ort 14
    15. 15. Biodiesel Industry Sub-Model 15
    16. 16. Land Use and Green Economy Sub-ModelsGreen Economy Indicators Land Allocation Land Demand Scenario Green GDP Forest Module GDP Limited Production Conversion Production Carbon Forest Forest Peat Forest Value Land Area Carbon Conservation Protection Stock Forest Forest Forest Area 16
    17. 17. Green Economy Framework forAnalysis Indicators Gini Coefficient Socially Inclusive Poverty LevelGreen Jobs in Rural Areas Low Carbon GHG Emissions CO2e Emission Biodiesel and Renewable Energy Mix Green Economy Green GDP Resource Efficiency Forest Land Carbon Stock Value 17
    18. 18. Integrated Decision Dashboard 18
    19. 19. Scenario Development Topology Scenario Approach Scenario Goal/Usage • Forecasting | Backcasting • Predictive: Forecasts | What If • Qualitative | Quantitative • Explorative: External | Strategic • Baseline | Policy • Normative: Preserving | Transforming • Dimensions of Uncertainties • Modeling Scenario Characteristics Scenario Goals: exploration or decision support Norms Inclusion: descriptive vs normative, Vantage point: forecasting vs backcasting, Subject: issue-based | area- based | institution-based, Time scale: long term vs short term, Spatial scale: global/supranational vs national/local; Process design: intuitive vs formal Data : qualitative vs quantitative, Data collection: participatory vs desk research, Resources: extensive vs limited, Institutional conditions: open vs constrained Scenario: Simple or Complex Temporal nature: clean vs snapshot, Variables: heterogenous vs homogenous, Dynamics: peripheral vs trend, Level of deviation: alternative vs conventional 19
    20. 20. Planned Scenario: What if with baseline vs policy 1. Business As 1B. BAU (No 2. REDD+ with 2B. REDD+ with 3. REDD+ with No Usual (BAU) Subsidy) Sustainable Palm Sustainable and Palm Oil Oil Efficient Palm Oil ExpansionFuel Price Subsidized Market Price with Market Price with Market Price with Market Price with EIA Projection EIA Projection EIA Projection EIA ProjectionBiodiesel Price Subsidized Fuel Market Price with Market Price with Market Price with Market Price with Price with EIA Projection EIA Projection EIA Projection EIA Projection additional IDR 2000Land Opening Slash and Burn Slash and Burn Slash and Mush Slash and Mush N/AMethodsLand Class Mostly High Mostly High Lowest Class due to Class Upgrade N/AProductivity Degradable LandFresh Fruit Bunch 3,5 ton/ha/year 3,5 ton/ha/year 3,5 ton/ha/year 6 ton/ha/year 6 ton/ha/yearProductivtyCPO Extraction 23,5% 23,5% 23,5% 25% 25%RateProduction Chain Independent Independent Integrated Integrated Biodiesel IndependentType Biodiesel Producers Biodiesel Producers Biodiesel Producers Producers Biodiesel (CPO Market Price) (CPO Market Price) (CPO Cost Price) (CPO Cost Price) Producers (CPO Market Price)Renewable Energy Off Target Off Target On Target On Target On TargetMix Achievement2025 20
    21. 21. Policy Implications Switching to green economy would require new data and new definitions with accepted measurements and indicators. National initiatives to gather these data is needed A new category of land-use: renewable energy production might be needed, with special considerations that are different than ordinary forest or agricultural land. A new category of industry: renewable industry with specific incentives could also be established Government policy to support increased investment in renewable energy needs to be carefully designed in an integrated manner and there is no one-size-fits-all approach (UNEP) 21
    22. 22. The 2nd International Workshop onAgent-Based Modelling and Simulation for Policy DevelopmentModeling the impacts of Indonesia’s REDD+Initiatives to the Biodiesel Targets inthe Green Economy Frameworkusing System DynamicsModelers PerspectivesAkhmad Hidayatno | Engineering, Modeling and Simulation LabIndustrial Engineering, Universitas 22