JTAP-E3: An Energy-Environment-Electricity Model of Japan

Electricity generation is an important sector in the fight against global warming and for energy security in some countries such as Japan. Crucial in this fight is an attempt to switch from a traditional reliance on fossil-fuel based electricity to other forms of electricity such as those based on renewable energy (given that the Fukushima accidents have practically eliminated the nuclear option for Japan). Most top-down economic models used for the analysis of these issues of technological change have the electricity generation sector only as a single aggregate sector with no detailed information on different technologies and the potential competition (or lack of it) between these technologies. In this paper, we develop a model based on GTAP-E but with detailed information on the electricity sector using cost structure details on the technologies derived from both economic data sources as well as GIS-based physical information relating to renewable energy potential in different geographical areas of Japan. The extended model (JTAP-E3) is then used to examine the issue of how to use economic policies to effectively promote economic growth at the same time reduce the reliance on nuclear-based and fossil-fuel based electricity. Using economic and GIS-based physical information to develop relative cost structures and infer elasticities of supply of different types of renewable energy based electricity. Integrate these information into a global trade-energy-environment model (GTAP-E) to arrive at an extended model with specific application to Japan (JTAP-E3). Use the new extended model for policy simulation experiments. The relative cost structures of different technologies will affect the ability of these technologies to compete for market shares in the electricity generation market. This in turn will shape the market structure and affect the effectiveness of energy and environmental policies aimed at changing this very structure. Some form of secondary government intervention (in the form of industry assistance or renewable energy targeting) may be required to assist in the effectiveness of the primary economic and energy policy objectives.