REXS: A forecasting model for assessing the impact of natural resource consumption and technological change on economic growth

Abstract

This paper describes the development of a forecasting model in the tradition of system dynamics. It is called Resource EXergy Services (REXS). The model simulates economic growth of the US through the 20th century and extrapolates the simulation for several decades into the next century. The REXS model differs from previous energy–economy models such as DICE and NICE [Nordhaus, W.D., 1991. The cost of slowing climate change: a survey. The Energy Journal 12 (1), 37–66] by eliminating the assumption of exogenously driven exponential growth along a so-called ‘optimal trajectory’. Instead, we suggest a simple model representing the dynamics of technological change in terms of decreasing energy (exergy) intensity and endogenously increasing efficiency of conversion of raw material and fuel inputs (exergy) to primary exergy services (‘useful work’). In our model, the traditional assumption of exogenous technological progress (total factor productivity) increasing at a constant rate is replaced by two learning processes based, respectively, on (i) cumulative economic output and (ii) cumulative energy (exergy) service (useful work) production experience. The initial results of simulation for the period 2000–2050 have significant implications for future trends in economic output. These implications are important for purposes of scenario analysis. The REXS modules are the focus of ongoing research. We discuss briefly the many possibilities for elaboration of each module to enrich the feedback dynamics, policy levers and post-scenario analyses.