Ventana software support forum

This is a reply from Tom Fiddaman at MIT to Agus Sari who is looking at the
market for permits to release carbon dioxide.

You might look at the following article, if you havent already seen it:

Luiz Pinuelli Rosa and Mauricio Tiomno Tolmasquin
An analytical model to compare energy-efficiency indices and CO2 emissions in
developed and developing countries.
Energy Policy 21(3) March 1993

This article doesnt address trade issues, but it does discuss the shift of
energy-intensive industries to developing countries.

A note on GAMS:

I took a brief look at GAMS at one time when I was planning to reproduce
Nordhaus DICE model of climate change. My assessment was that, while it was
good for optimization and general- equilibrium type problems, its lousy for
building complex dynamic models with behavioral decision rules.
Disequilibrium and behavior play a crucial role in trade and the shift of
energy intensive industries, so I would at least consider switching to a tool
(like vensim) with a simulation/SD/structural focus but which still provides
some optimization capability.

More specifically, its hard to document and diagram a model in GAMS, and the
code is somewhat incomprehensible to the casual observer. Worse, GAMS is
fundamentally rooted in discrete-time; this leads to discrete-time thinking,
and GAMS models Ive looked at tended to be plagued with DT error and
stock-flow ambiguities.

You should take these comments with a grain of salt, since Im not a GAMS
user, and unfamiliarity breeds contempt. Id be happy if someone could update
or challenge my assessment of GAMS.

- Tom Fiddaman

Id be happy to discuss this more, but its best if you reach me at:
tomfid@mit.edu

>This is a reply from Tom Fiddaman at MIT to Agus Sari who is looking at the
>market for permits to release carbon dioxide.

Tom, thank you for your response, and for the article you mentioned. I have
developed the model in GAMS, and while I am open to other tools (I have also
used Mathematica and Stella, although for this purpose they are too slow), I
will probably stick to it for now. I have found it quite straightforward and
easy to get familiar with, although, I agree that it is difficult to
diagram. To crunch large database, however, I havent seen any other that
works as fast as it.

It seems, though, people have misunderstood my question. As part of a bigger
model, I only would like to know the impact of carbon dioxide emissions
control in the committed countries (Listed in Annex-I in the Climate
Convention) on the price of energy-intensive products in those countries.
For example, if the emissions control is undertaken as carbon-tax, it will
increase the price of energy, which in turn will increase the price of
energ-intensive products (basic metal, steel, chemical, etc.). To what
extent the price of energy-intensive products increases due to emissions
control depends on (1) The carbon/energy intensity of the industries
producing these products; and (2) The price elasticity.

Carbon Emissions Control ---> Price of Energy ---> Price of Energy Intensive
Products

It will be very helpful to get a sensitivity analysis on how much (in
percentage) the price of enenrgy-intensive products will go up due to a
percentage increase of emissions control, for example. I flipped through
Nordhaus and Cline, and found only the first arrow, i.e., carbon emissions
stabilization to 4 GT would lead to about 30 percent of gasoline price etc.
>From there to the price of energy-intensive products, however, is still missing.

If anybody could come up with ideas, leads to articles, that would be very
helpful.
____________________________________________________________________________

Agus P. Sari Energy and Resources Group
14 Whitmore Place Apt#. 17 University of California, Berkeley
Oakland, CA 94611 310 Barrows Hall, Berkeley, CA 94720-3050
(510)-654-2091 (510)-642-6886, -642-8829
apsari@violet.berkeley.edu Fax: (510)-642-1085

Check us out:
www.sdn.or.id/pelangi
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

For Agus Sari:

The Europeans take GHG much more seriously than does the US. Cambridge
Econometrics Ltd. (Terry Barker, CEO) out of the UK has been looking at the
feedback impacts of this problem for years in the UK and for the European
Commission. They use I/O with cointegration. (Cointegration could be viewed as a
perverse form of SD that uses the equation form but goes "a-theoretical" when
"fitting the equation" to data. Problem is that they have made outrageoulsy
accurate forecasts for decades with the method.

You can see some of the papers from the last GHG conference at www.risoe.dk. A
starting paper by Barker and myself is at www.risoe.dk/sys/backus.html. The
paper is useless but the biblio may be helpful.

George Backus Email: gbackus@boulder.earthnet.net
Policy Assessment Corporation phone: (303) 467-3566; fax: (303) 467-3576
14604 West 62nd Place Denver, Colorado 80004, USA