MESSAGE–MACRO: linking an energy supply model with a macroeconomic module and solving it iteratively

Abstract

MESSAGE–MACRO is the result of linking a macroeconomic model with a detailed energy supply model. The purpose of the linkage is to consistently reflect the influence of energy supply costs as calculated by the energy supply model in the optimal mix of production factors included in the macroeconomic model. In this article, we describe an automated link of two independently running models. The advantages of this setup over a single, fully integrated model are twofold: First, it is more flexible, leaving the constituent models intact for independent runs, thus making further model development an easier task. Second, the decomposed model solution benefits numerically from having the most non-linearities concentrated in the smaller of the two modules. The emphasis of the paper is on methodology, but we also include an example demonstrating the feedback mechanisms of MESSAGE–MACRO by applying it to two global economic–energy–environment scenarios. The two scenarios are a reference scenario and a scenario that limits the global atmospheric carbon concentration to 550 ppmv. The scenarios are compared in terms of GDP, energy supply and demand, and energy prices.