Global energy modelling — A biophysical approach (GEMBA) part 1: An overview of biophysical economics

Abstract

Economists, investors and policy makers need to understand energy systems and the potential for investment in both alternative energy supply and demand side technologies. Biophysical economics has contributed to conventional economics by incorporating thermodynamic and ecological principles and emphasising the importance of natural resources to economic processes. This paper is presented in two parts. Part 1 gives a historic review of biophysical economics and discusses some previous models of the energy-economy system built around the principles of biophysical economics. Part 2 presents the GEMBA model — a new modelling methodology in the biophysical economics tradition. The methodology proposes a new and important contribution to the field of biophysical economics; a lifetime evolving function for the dynamics of the energy return on investment (EROI). The dynamic EROI function was incorporated into the GEMBA model and implemented in Vensim. The model is calibrated using historical energy production data, i.e. trained to historical data. The trained model is run to 2100 under a variety of assumptions regarding availability of energy resources and corresponding EROI's. The main finding of the model is that growth of the renewable energy sector may impact investment in other areas of the economy and thereby stymie economic growth.