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GTAP Resource #1706

"A Coupled Bottom-Up / Top-Down Model for GHG Abatement Scenarios in the Swiss Housing Sector"
by Drouet, Laurent, Alain Haurie, Maryse Labriet, Philippe Thalmann, Marc Vielle and Laurent Viguier

This paper reports on the coordinated development of a top-down macro-economic model and a bottom-up
technology-energy-environment model to assess long term
climate policies in Switzerland. concerned by the various
dimensions of climate studies. We briefly present (i) a
computable general equilibrium model (CGEM) which places
Switzerland in a world model called GEMINI-E3 and (ii) a
bottom-up energy-technology-environment model (ETEM)
inspired from the MARKAL modelling framework. We then show
how one can couple the two models to obtain a hybrid
top-down/bottom-up model producing a macro-economic
scenario with detailed technology description for the
residential sector in Switzerland.

In the literature the relations between the economy, the
energy sector and the environment are described in two
broad classes of models called top-down and
bottom-up respectively. The first category
approaches the problem from a description of the
macro-economic relations in the region under consideration,
whereas the bottom-up models propose a technology rich
description of the energy system and place the emphasis on
the correct description of energy options and their cost
structure. These two categories of models are
complementary, the former capturing a larger set of
economic interactions (i.e. inter-industrial relations and
macro-economic feedbacks) without representing explicitly
energy technology options and the latter representing well
the details of the energy sector and the technology ranking
procedures in a world characterized by technological
innovation. Bottom-up models are used to compute partial
economic equilibria in the energy sector under different
constraints on pollutant or GHG emissions. They usually
assume perfect foresight and produce optimized technology
investment policies over a planning horizon of several
decades typically 45 years for MARKAL models. These models
are driven by energy service demands that are either
exogenously defined or dependent on their own prices
supposed to be indicated by the long term marginal cost of
demand constraints, with exogenously defined
price-elasticities. The optimization over a long time
horizon coupled with a rather limited economic feedback
induced by changes in relative prices makes these models more
prescriptive than predictive of what could really happen.

On their side, top-down models tend to neglect the
description of energy and technology options, in particular
the possible introduction of new options. Because they are
technology-poor they tend to overemphasize the economic
adjustments and overlook the possible technology changes
that will be induced by the changes in relative prices.
Because of this complementarity it appears promising to go
beyond this taxonomy of economy-energy-environment models.
Already, a number of existing models are hybrid,
providing simultaneously some details on the structure of
the economic and technological sectors
. Different approaches have been
used: (i) Coupling optimal growth models with energy
system models: ETA-MACRO and MARKAL-MACRO are examples of
a coupling of a bottom-up MARKAL model with an optimal
economic growth model à la Ramsey which determines
through inter-temporal optimization the optimal path of
capital accumulation and demand for energy services, under
specified emissions reduction. (ii) Coupling
input-output economic models with energy system models:
In this approach the economy is described by a Leontieff
model of interindustry exchange; the energy sector is
detailed as a linear production system. (iii)
Coupling a CGEM with an ETEM: This is the most
attractive type of coupling, since a CGEM provides a more
complete representation of the different economic feedbacks
and permits a correct treatment of the different taxes and
market imperfections in the economy under consideration.

The present paper is an attempt to implement the third type
of coupling with a focus on the residential sector in the
Swiss economy. The paper is organized as follows: in
1 we briefly recall Swiss climate policy and
we show why the focus on the residential sector is
justified. In section 2 we describe the GEMINI-E3
implementation for Switzerland. In section 3 we
describe the ETEM-SWI development. In section 4 we
describe the coupling of GEMINI-E3 and the residential
sector in ETEM-SWI. In section 5 the scenarios
obtained with the CGEM and the ETEM run in a stand-alone
fashion are compared and the gain in insight obtained
through the coupling is assessed. Section 6
concludes and proposes further developments.

Resource Details (Export Citation) GTAP Keywords
Category: 2005 Conference Paper
Status: Published
By/In: Presented at the 8th Annual Conference on Global Economic Analysis, Lübeck, Germany
Date: 2005
Created: Vielle, M. (4/28/2005)
Updated: Vielle, M. (4/28/2005)
Visits: 3,032
No keywords have been specified.

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