Alan S. Manne

MERGE. A model for evaluating regional and global effects of GHG reduction policies

Abstract MERGE provides a framework for thinking about climate change management proposals. The model is designed to be sufficiently flexible to be used to explore alternative views on a wide range of contentious issues, eg costs, damages, valuation and discounting. We begin with a description of the models individual components and show how they fit together. We then provide an initial application to illustrate how the framework can be used in the assessment of alternative policy options. Given the level of uncertainty which pervades the climate debate, it would be unrealistic to expect cost-benefit analysis to lead to consensus on a bottom line — at least any time soon. Rather, models such as MERGE should be viewed as research tools capable of providing insights into which aspects of the debate may be most important. In this way, they can help focus the discussion and identify the areas where additional research may have the highest pay-off.

An alternative approach to establishing trade-offs among greenhouse gases

The Kyoto Protocol permits countries to meet part of their emission reduction obligations by cutting back on gases other than CO2 (ref. 1). This approach requires a definition of trade-offs among the radiatively active gases. The Intergovernmental Panel on Climate Change has suggested global warming potentials for this purpose, which use the accumulated radiative forcing of each gas by a set time horizon to establish emission equivalence. But it has been suggested that this approach has serious shortcomings: damages or abatement costs are not considered and the choice of time horizon for calculating cumulative radiative force is critical, but arbitrary. Here we describe an alternative framework for determining emission equivalence between radiatively active gases that addresses these weaknesses. We focus on limiting temperature change and rate of temperature change, but our framework is also applicable to other objectives. For a proposed ceiling, we calculate how much one should be willing to pay for emitting an additional unit of each gas. The relative prices then determine the trade-off between gases at each point in time, taking into account economical as well as physical considerations. Our analysis shows that the relative prices are sensitive to the lifetime of the gases, the choice of target and the proximity of the target, making short-lived gases more expensive to emit as we approach the prescribed ceiling.

Global CO2 Emission Reductions: The Impacts of Rising Energy Costs

In recent years there has been growing concern that the increasing accumulation of greenhouse gases in the earth’s atmosphere will lead to undesirable changes in global climate. This concern has resulted in a number of proposals, both in the U.S. and internationally, to set physical targets for reducing greenhouse gas emissions.

Buying greenhouse insurance : the economic costs of carbon dioxide emission limits

The book focuses on insuring against damages by finding a least-cost combination of abatement, technology development, and the resolution of scientific uncertainty. The work integrates a technology process model and a macroeconometric forecasting model into a formal decision theory framework to evaluate optimal timing of response to global warming.

On stabilizing CO2 concentrations – cost‐effective emission reduction strategies

With the adoption of the Berlin Mandate, developed countries are being asked to set emission limits for the early decades of the next century. The size of the reductions is currently the subject of international negotiations. This paper is intended to contribute to the analysis and assessment phase leading up to the adoption of new targets and timetables. However, we take a somewhat different approach than that suggested by the Berlin Mandate. Rather than focus exclusively on the next steps by developed countries, we view the issue from the perspective of the Conventions ultimate objective, the stabilization of atmospheric concentrations. We examine what might constitute cost‐effective strategies for limiting CO2 concentrations to alternative levels. We then explore the implications for near‐term mitigation decisions and for long‐term participation by the developing countries.

Merge: An Integrated Assessment Model for Global Climate Change

MERGE is a model for estimating the regional and global effects of greenhouse gas reductions. It quantifies alternative ways of thinking about climate change. The model contains submodels governing: ▪ the domestic and international economy; ▪ energy-related emissions of greenhouse gases; ▪ non-energy emissions of GHGs; ▪ global climate change — market and non-market damages.

Nested decomposition for dynamic models

This nested decomposition algorithm is intended for solving linear programs with the staircase structure that is characteristic of dynamic multi-sector models for economic development. Staircase problems represent a special case of the discrete-time optimal control problem. Our method is based upon the same principles as that of Glassey [5], but appears easier to describe and to relate to control theory.Computational experience is reported for a series of test problems. The algorithm has been coded in MPL, an experimental language for mathematical programming. This translator has made it possible to obtain a more readable program — and with fewer instructions — than one written in a conventional language. However, because the present version of MPL does not permit the use of slow access memory, this has prevented us from exploring the full potential of nested decomposition for solving larger problems than can be handled by conventional simplex techniques.

MARKAL-MACRO: A linked model for energy-economy analysis

MARKAL-MACRO is an experiment in model linkage for energy and economy analysis. This new tool is intended as an improvement over existing methods for energy strategy assessment. It is designed specifically for estimating the costs and analyzing the technologies proposed for reducing environmental risks such as global climate change or regional air pollution. The greenhouse gas debate illustrates the usefulness of linked energy-economy models. A central issue is the coupling between economic growth, the level of energy demands, and the development of an energy system to supply these demands. The debate is often connected with alternative modeling approaches. The competing philosophies may be labeled ``top-down macroeconomic`` and ``bottom-up engineering`` perspectives. MARKAL is a systems engineering (physical process) analysis built on the concept of a Reference Energy System (RES). MARKAL is solved by means of dynamic linear programming. In most applications, the end use demands are fixed, and an economically efficient solution is obtained by minimizing the present value of energy system`s costs throughout the planning horizon. MACRO is a macroeconomic model with an aggregated view of long-term economic growth. The basis input factors of production are capital, labor and individual forms of energy. MACRO is solved by nonlinear optimization.

The rate of time preference: Implications for the greenhouse debate

Abstract If one adopts a real annual discount rate of 5% or more — and there are no significant climate impacts for half a century — these impacts have a present value that is virtually negligible. Within a cost-benefit framework, it then becomes exceedingly difficult to justify any near-term actions other than no-regrets policies. In the greenhouse debate, it is important to draw a clear distinction between prescriptive and descriptive reasoning. A philosopher or an economist may counsel a low or a zero rate of time preference, but this advice does not provide a good description of the collective outcome of individual choices. In particular, it implies an unrealistically rapid increase in the rate of savings and investment.

Feature Article-Energy Policy Modeling: A Survey

This survey provides an exposition of seven technoeconomic models that are representative of recent work on energy policy. The paper begins with several microeconomic concepts related to energy conservation and to energy-economy interactions. We then examine three representative medium-term models which deal with pricing, import policy and investment decisions in todays conventional supply technologies. Next, we analyze four studies dealing with longer-range issues-alternative research and development strategies for a transition away from depletable energy resources. The paper concludes with a summary of unresolved issues, and with suggestions on the future role of modeling in the public policy process.