Environmental Engineering Reference
In-Depth Information
the Market Allocation-Macro (MARKAL-Macro) model. The GTAP-E model
developed at Purdue University
11,12
is a CGE economic top-down model
which is designed to assess regional economic and environmental impacts
of national and multi-national energy-economy-environmental-trade pol-
icies. Alternative versions of this model are used in many economic and
environmental analyses.
13-16
The model traces production, consumption
and trade of goods and services, categorised in several groups, by region. It
considers substitution among energy sources and between capital and en-
ergy and takes into account competition for energy and other resources
among firms. It also manages allocation of energy between households and
firms. We modified and extended this model and its database to correctly
analyse expansion in US shale gas and its consequences for other energy
sources and economic activities.
To help with the GTAP model and database modification, we used a
modified version of the MARKAL-Macro model, which is a bottom-up dynamic,
perfect-foresight and energy technology-rich linear programming model widely
applied in the energy area. In its standard formulation, its objective function is
the minimisation of the discounted total system cost, which is formed by
summation of capital, fuel and operating costs for resource, process, infra-
structure, conversion and end-use technologies.
17
Sarica and Tyner revised the
MARKAL model according to new developments in the energy sectors and, in
particular, with respect to recent expansion in US biofuel production and,
more importantly, in response to the US shale gas boom.
18
To develop the GTAP modeling framework and database for this analysis,
we began with the GTAP database version 8 which represents the world
economy in 2007.
19
We made several major modifications in the GTAP-E
modeling framework and database to make it more consistent with in-
dependent data sources and the MARKAL model projections for the energy
market. Then several experiments were developed to evaluate the regional
economic and GHG emission impacts of the US shale gas boom under al-
ternative trade policy configurations.
GTAP is a multi-commodity and multi-regional computable general
equilibrium model documented in Hertel.
20
It uses constant returns-to-scale
production functions and assumes markets are all competitive. In this
model each region is represented by a regional household. As shown in
Figure 1, the regional household (e.g. the United States) collects all the in-
come (including taxes and payments to the primary factors of production
such as labour, land, capital and natural resources) in its region and spends
it over three expenditure types - private household (consumer), government
and savings. The model divides the supply side of the economy into several
distinct sectors. Firms pay wage/rental rates to the regional household in
return for the employment of land, labour, capital and natural resources.
Firms sell their output to other firms (intermediate inputs), private house-
holds, government and investment.
Since GTAP is a global model, firms also export tradable commodities and
import intermediate inputs from other regions. The government and private
