UK energy-environment-economy
MDM-E3 is the UK's most detailed integrated energy-environment-economy (E3) model, designed to analyse and forecast changes in economic structure, energy demand and resulting environmental emissions.
Flows in the economic model are generally in constant prices, while the energy-environment modelling is done in physical units. Energy-environment characteristics are represented by submodels within MDM-E3, and at present the coverage includes energy demand (primary and final), environmental emissions, and the electricity supply industry (including a detailed, and separate model treatment of Combined Heat and Power) and linked to a dynamic investment decision model of the take-up of emerging non-carbon electricity technologies. The energy industries are included within the basic input-output structure, and MDM-E3 is a fully-integrated single model, allowing extensive economy-energy-environment interaction. There is a substantial degree of disaggregation in the model with the specification of 41 industry sectors, 11 fuels, 13 fuel users, and 14 types air emissions (including the six greenhouse gases, emissions of which are controlled by the Kyoto Protocol).
The ability to look at interactions and feedback effects between different sectors - industries, consumers, government - and the overall macroeconomy is essential for assessing the impact of government policy on energy inputs and environmental emissions. The alternative, multi-model approach, in which macroeconomic models are combined with detailed industry or energy models, cannot adequately tackle the simulation of 'bottom-up' policies. Normally these systems are first solved at the macroeconomic level, and then the results for the macroeconomic variables are disaggregated by an industry model. However if the policy is directed at the level of industrial variables, it is very difficult (without substantial intervention by the model operator) to ensure that the implicit results for macroeconomic variables from the industry model are consistent with the explicit results from the macro model. As an example, it is very difficult to use a macro-industry, two-model system to simulate the effect of exempting selected energy-intensive industries from a carbon or energy tax.
In summary MDM-E3 provides:
- annual projections up to 2020:
- energy demand by fuel type in original units and percentage annual growth
- energy demand by fuel user converted into mt of oil equivalent and percentage shares
- price of main fuels in annual percentage growth terms
- emissions of CO2 and SO2 in m tonnes of carbon and thousand tonnes of sulphur dioxide respectively and annual percentage growth terms
- the ability to analyse the interactions and feedback effects between the sectors of the economy and the energy-using sectors and the consequent impact on environmental emissions within a fully integrated single model
- scenario analysis to guide the evaluation of alternative energy-environment policies (eg the Climate Change Levy, energy efficiency programmes) and carbon-reduction or renewables targets in terms of their effectiveness and their impact on energy use and environmental emissions
For further information, contact:
Sudhir Junankar
Manager, Energy-Environment Service
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