Economy-wide (general equilibrium) analysis of Philippines ... 14 Textile, garments and footwear TextGarmFoot

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  • Center for Global Trade Analysis

    Department of Agricultural Economics, Purdue University

    403 West State Street, West Lafayette, IN 47907-2056 USA

    contactgtap@purdue.edu

    http://www.gtap.agecon.purdue.edu

    Global Trade Analysis Project

    Economy-wide (general equilibrium) analysis of Philippines’ mitigation

    potential Erwin Corong

    Center for Global Trade Analysis, Purdue University

    Crowne Plaza Hotel, Manila 11 January 2016

  • • Introduction and motivation

    • Methodology

    • Business as Usual (BaU) or Baseline scenario

    • Simulation results

    • Insights

    Presentation outline

    2

  • • With energy use (and population) on the rise, increases in carbon emissions are almost inevitable…

    • Increasing use of coal to generate electricity

    • Rising demand for transport fuel

    • Investigate the potential economic and distributional impact of low carbon growth strategies in the Philippines

    • Analysis with particular focus on Philippine policy options

    Motivation

    3

  • • Partial equilibrium model (e.g. EFFECT) • More detailed power/energy sector • Impacts limited to one or a few sectors of the economy • Cannot account for economy-wide (feedback) effects or trade-offs

    • General equilibrium (CGE) model • Encompass the entire economy (disaggregated database with many industries/sectors,

    labor and households types) • Impacts in one sector affects all other sectors of the economy • Accounts for country-specific (supply and demand) constraints (i.e., factors are not

    limitless) • Typically less power sector detail

    • Combined use of partial and national models is preferable

    Methodology

    4

  • • Use EFFECT results • CGE baseline uses EFFECT electricity forecasts

    • Macro-micro framework • Computable general equilibrium (CGE) model with energy detail

    • CGE model linked to household survey-based micro simulation module for distributional (poverty) analysis

    • Impacts analyzed from macro (GDP, trade) to micro (industries, labor market, household income and poverty)

    Modeling approach

    5

  • • Economy-wide: Ideal for tracing detailed impacts and identifying transmission channels

    • Policies to reduce carbon footprint will lead to changes in relative energy price

    • …then result in changes in the relative prices of goods and services, thus altering the production and economic structure.

    • In turn, the changes in relative prices coupled with changes in economic structure will alter household incomes and consumptions patterns.

    • Downside: Not a bottom-up energy model

    Why use a CGE?

    6

  • • Philippine General Equilibrium model - Energy • SAM-based dynamic recursive CGE model of the Philippine economy • Extension of PHILGEM model (Corong and Horridge 2012) • Facilitates analyses of the possible short- and long-term impacts of policy

    responses to low carbon growth policies

    • PHILGEM-RD-E explicitly • tracks carbon emissions • allows for energy substitution among non-energy industries • distinguishes electricity generation by technology • allows the electricity sector to substitute away from carbon intensive electricity

    generation technologies towards less carbon-intensive and carbon-free electricity generation technologies

    PHILGEM-E model

    7

  • Production structure

    8 Non-energy industries Electricity and energy industries

  • Sectors

    9

    Commodity Description Elements of Set COM Industry Description

    1 Paddy rice Paddy 1 Paddy rice

    2 Corn Corn 2 Corn

    3 Fruits and vegetables FruitsVege 3 Fruits and vegetables

    4 Other crops OtherCrops 4 Other crops

    5 Livestock and poultry LvstkPoultry 5 Livestock and poultry

    6 Other agriculture OtherAgric 6 Other agriculture

    7 Mining Mining 7 Mining

    8 Coal Coal (Carbon) 8 Coal

    9 Crude oil Crude (Carbon) 9 Crude oil and natural gas

    10 Natural gas NatGas (Carbon)

    11 Processed food ProcFood 10 Processed food

    12 Rice, corn, sugar milling Rice 11 Rice, corn, sugar milling

    13 Tobacco and alcohol TobacAlchl 12 Tobacco and alcohol

    14 Textile, garments and footwear TextGarmFoot 13 Textile, garments and footwear

    15 Other manufacturing OtherManuf 14 Other manufacturing

    16 Chemicals Chemicals 15 Chemicals

    17 Gasoline Gasoline (Carbon) 16 Petroleum refinery

    18 Diesel oil DieselOil (Carbon)

    19 Fuel oil FuelOil (Carbon)

    20 Liquefied petroleum gas LPG (Carbon)

    21 Other petroleum products OthPetrol (Carbon)

    22 Metal products Metals 17 Metal products

    23 Machineries Machines 18 Machineries

    24 Electric appliances ElecRelAppli 19 Electric appliances

    25 Semi-conductors Semicon 20 Semi-conductors

    26 Electricity-oil ElecOil 21 Electricity-oil

    27 Electricity-hydro ElecHydro 22 Electricity-hydro

    28 Electricity-geothermal ElecGeoth 23 Electricity-geothermal

    29 Electricity-coal ElecCoal 24 Electricity-coal

    30 Electricity-Natural gas ElecNatGas 25 Electricity-Natural gas

    31 Electricity-renewables ElecRenew 26 Electricity-renewables

    32 Electricity distribution ElecDist 27 Electricity distribution

    33 Utilities Utilities 28 Utilities

    34 Retail & wholesale trade Trade (Margin) 29 Retail & wholesale trade

    35 Transport Transport (Margin) 30 Transport

    36 Communication Communicate 31 Communication

    37 Construction Construction 32 Construction

    38 Ownership of dwellings Dwellings 33 Ownership of dwellings

    39 Public services PublicSrvcs 34 Public services

    40 Private services PrivateSrvcs 35 Private services

  • • 2010 Social Accounting Matrix • Input-Output table updated using 2010 national accounts

    • 2009/2010 Family Income and Expenditure Survey

    • The 35 industries are classified into: • 6 agriculture and 3 mining-related industries

    • 3 processed food and beverage industries; 5 manufacturing industries that include petroleum refining

    • 7 electricity industries composed of 6 types of electricity generation technology and an electricity distribution • 8 services industries that includes government services. In total, these industries produce 40 commodities.

    • 2 our of 35 industries are multi-product industries • CrudeNatGas extraction produces both natural gas and crude oil

    • Petroleum refining industry produces 5 fuel-related commodities such as gasoline, diesel oil, fuel oil, liquefied petroleum gas, and other petroleum products.

    • Households • 160 representative household groups classified by the gender of the household head (female and male), by income

    deciles (deciles 1 to 10), and main source of income (wage earners, entrepreneur, transfer-reliant, and diversified) • 160 RHGs mapped to 38400 households in the FIES

    • Power generation and carbon emissions data from Department of Energy (DoE)

    Model’s database

    10

  • Share in CO2 emissions (74.5 million tons, year 2010)

    11

    Coal 37%

    Crude oil 1%

    Natural gas 10%

    Gasoline 11%

    Diesel 24%

    Fuel oil 11%

    LPG 4%

    Other petrol 2%

    Industry 16%

    Electricity 43%

    Transport 32%

    Energy 1%

    Others 8%

    Source: Department of Energy

  • Electricity generation, by input type (2010)

    12

    Oil 7,101.0

    Hydro 7,803.4

    Geothermal 9,929.2

    Coal 23,301.1

    Natural gas 19,517.9

    Renewable 90.2

    Oil 10.5%

    Hydro 11.5%

    Geothermal 14.7%

    Coal 34.4%

    Natural gas 28.8%

    Renewable 0.1%

    Generation (in GWh) Shares (in %)

    Source: Department of Energy

  • • Actual 2010 to 2014 GDP growth rates

    • 6% GDP forecast from 2015 to 2050 (shown in Table 3)

    • 1.8% yearly population growth rate

    • 5% yearly depreciation rate

    • Actual electricity generated (in GWh) from 2011 to 2014; and

    • 2015 to 2050 electricity projections (in GWh) from the EFFECT model

    CGE Baseline

    13

  • GDP (expenditure-side)

    14

    -40,000

    -20,000

    0

    20,000

    40,000

    60,000

    80,000

    2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

    GDP Consumption Investment Government Exports Imports

  • GDP (income-side)

    15

    0

    20,000

    40,000

    60,000

    80,000

    2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

    GDP Land Labour Capital Indirect Tax

  • Electricity generation (from EFFECT, in TWh)

    16

    0

    50

    100

    150

    200

    250

    300

    350

    400

    2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2