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Where Are the Industrial Technologies in Energy-Economy Models?: An Innovative CGE Approach for Steel Production in Germany

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  • Katja Schumacher
  • Ronald D. Sands

Abstract

Top-down computable general equilibrium (CGE) models are used extensively for analysis of energy and climate policies. Energy-intensive industries are usually represented in top-down economic models as abstract economic production functions, of the constantelasticity-of-substitution (CES) functional form. This study explores methods for improving the realism of energy-intensive industries in top-down economic models. We replace the CES production function with a set of specific technologies and provide a comparison between the traditional production function approach in CGE models and an approach with separate technologies for making iron and steel. In particular, we investigate the response of the iron and steel sector to a set of CO2 price scenarios. Our technology-based, integrated approach permits a choice between several technologies for producing iron and steel and allows for shifts in technology characteristics over time towards best practice, innovative technologies. In addition, the general equilibrium framework allows us to analyze interactions between production sectors, for example between electricity generation and iron and steel production, investigate simultaneous economy-wide reactions and capture the main driving forces of greenhouse gas emissions reductions under a climate policy. We conclude that technology specific effects are crucial for the economic assessment of climate policies, in particular the effects relating to process shifts and fuel input structure.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44530.de/dp605.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 605.

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Length: 29 p.
Date of creation: 2006
Date of revision:
Publication status: Published in: Energy Economics 29 (2007) 4, 799-825
Handle: RePEc:diw:diwwpp:dp605

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Keywords: Industrial technologies; energy use; iron and steel production; technological change; general equilibrium modeling;

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References

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Citations

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Cited by:
  1. Marlene Arens & Ernst Worrell & Joachim Schleich, 2012. "Energy Intensity Development of the German Iron and Steel Industry between 1991 and 2007," Grenoble Ecole de Management (Post-Print) hal-00805730, HAL.
  2. Boeters, Stefan & Koornneef, Joris, 2011. "Supply of renewable energy sources and the cost of EU climate policy," Energy Economics, Elsevier, vol. 33(5), pages 1024-1034, September.
  3. Alexeeva-Talebi, Victoria & Böhringer, Christoph & Löschel, Andreas & Voigt, Sebastian, 2012. "The value-added of sectoral disaggregation: Implications on competitive consequences of climate change policies," ZEW Discussion Papers 12-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Greening, Lorna A. & Boyd, Gale & Roop, Joseph M., 2007. "Modeling of industrial energy consumption: An introduction and context," Energy Economics, Elsevier, vol. 29(4), pages 599-608, July.
  5. Zhou, Sheng & Kyle, G. Page & Yu, Sha & Clarke, Leon E. & Eom, Jiyong & Luckow, Patrick & Chaturvedi, Vaibhav & Zhang, Xiliang & Edmonds, James A., 2013. "Energy use and CO2 emissions of China's industrial sector from a global perspective," Energy Policy, Elsevier, vol. 58(C), pages 284-294.
  6. Fleiter, Tobias & Worrell, Ernst & Eichhammer, Wolfgang, 2011. "Barriers to energy efficiency in industrial bottom-up energy demand models--A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(6), pages 3099-3111, August.
  7. Florens Flues & Dirk Rübbelke & Stefan Vögele, 2013. "Energy Efficiency and Industrial Output: The Case of the Iron and Steel Industry," Working Papers 2013.96, Fondazione Eni Enrico Mattei.

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