Partial Equilibrium Model Research Articles

Integrated Assessment of Economic Supply and Environmental Effects of Biomass Co-Firing in Coal Power Plants: A Case Study of Jiangsu, China

The technical supply potential of biomass and the associated greenhouse gas (GHG) emissions are widely studied in the literature. However, relatively few studies have examined the role of biomass co-firing for future electricity in China by integratedly considering the economic supply potential and GHG effects. To fill this gap, we choose the Jiangsu Province in China as a case study and build up a partial equilibrium model with multiple agricultural commodities. Using this model combined with a life cycle assessment, we jointly determine the economic potential of the biomass supply for a biomass co-firing purpose and social benefits, including the agricultural producers’ surplus and GHG mitigation potential. The simulation incorporates the county-level biomass market of various crop residues as well as endogenous crop prices and transportation costs. We find that 0.7–12.5 M MT of residue-based biomass are economically viable for co-firing in coal-based power plants (up to 20%) at biomass prices between USD 50 and USD 100/MT. The net GHG savings achieved at these biomass prices are from 3.2 to 59 M MTCO2e. Our findings indicate that biomass co-firing with coal in power plants would be a feasible low-carbon energy transition pathway if the biomass price is above USD 50/MT. In addition to biomass prices, other factors such as crop yields, production costs of residues, and transportation costs are found to be impactful on the economic viability of biomass and GHG savings. Our results can inform policy to develop localized carbon reduction strategies in provinces with abundant biomass resources and a high share of coal-fired electricity.

Reducing US biofuels requirements mitigates short-term impacts of global population and income growth on agricultural environmental outcomes

Biobased energy, particularly corn starch-based ethanol and other liquid renewable fuels, is a major element of federal and state energy policies in the United States. These policies are motivated by energy security and climate change mitigation objectives, but corn ethanol does not substantially reduce greenhouse gas emissions when compared to petroleum-based fuels in all production scenarios. Corn production also imposes substantial negative externalities (e.g., nitrogen leaching, higher food prices, water scarcity, and indirect land use change). In this paper, we utilize a partial equilibrium model of corn-soy production and trade to analyze the potential of reduced US demand for corn as a biobased energy feedstock to mitigate increases in nitrogen leaching, crop production and land use associated with growing global populations and income from 2020 to 2050. We estimate that a 24% demand reduction would sustain land use and nitrogen leaching below 2020 levels through the year 2025, and a 41% reduction would do so through 2030. Outcomes are similar across major watersheds where corn and soy are intensively farmed.

Quantifying the Impact of the Latest US Tariff Sanctions on Russia: A Sectoral Analysis

In addition to the existing import ban on energy products (oil, gas, coal), the United States recently announced a new sanction package that imposes significantly higher import tariffs on 570 product groups from Russia. These tariff increases affect more than USD 2 billion in US imports from Russia. Using a sector-specific partial-equilibrium (PE) model, we quantify the impact of these US tariff increases. We find that the new tariffs affect 8.7% of total US imports from Russia and may decrease Russian welfare by USD 181 million per year, while imposing annual costs of USD 90 million on US consumers. Our sectoral analysis shows that the US’ choice of target sectors produces mixed results. On one hand, the sanctions cover dozens of sectors whose inclusion produce particularly large welfare losses to Russia and/or high welfare gains to the US Yet, for several target sectors higher tariffs result in zero harm to Russia, and/or greater harm to the US than to Russia. For example, higher tariffs for several selected sectors result in zero harm to Russia, and/or greater harm to the United States than to Russia. These and other insights may provide guidance for the design of future tariff sanctions by the European Union (EU) and other Allies. International trade, war in Ukraine, economic sanctions, import tariffs, economic impact, partial equilibrium, sectoral analysis, welfare analysis, pass-through, tariff revenue, Russia, United States, European Union

Методика отбора регионов для исследования адаптации сельского хозяйства к изменению климата

The impact of climate change on the social and institutional conditions of agriculture (as opposed to technological ones) in Russia has hardly been studied. With a limited budget, such research should examine a small sample of regions. To reduce the subjectivity, a formalised methodology for creating and ranking small samples of regions was developed. While occupying the largest possible share in the country’s gross agricultural production, the regions included in the sample should significantly differ in natural and agricultural zones, agricultural production efficiency, contribution of peasant farms to agricultural output. Unlike other methods, the proposed technique uses a linear programming problem, where all corner solutions are integer. Data envelopment analysis (DEA) was utilised to ensure the inclusion of both efficient and inefficient regions in the sample. In accordance with these requirements, Altai, Krasnoyarsk, Krasnodar krais and Moscow oblast were selected for analysis. For the regions included in at least one of the five best samples (such as Volgograd, Saratov and Leningrad oblasts), a model of partial equilibrium on the wholesale markets of agricultural products of the constituent entities of the Russian Federation (VIAPI model) was applied to assess the impact of scenario climate change on the output and wholesale prices of ten types of agricultural products. The research revealed that while the production in the selected regions is resistant to this influence, except for Altai and Krasnoyarsk krais, regional market prices are still rising due to the impact of world prices for milk products and grain.

The impact of live sheep export trade on the South Africa economy

<abstract> <p>The study assesses the impact of the live sheep export trade on the South African economy. The study used a recent South African Social Accounting Matrix and a partial equilibrium model. The results are mixed. On a positive note, the higher the demand for live sheep exports, the higher the prices and the more significant the economic impact. On the other hand, South Africa loses value-adding opportunities such as output from abattoirs, including hides and skin, offal, head, and consumable internal organs, and employment when live lambs are exported and slaughtered in destination markets. These findings help policymakers to develop appropriate mitigation strategies to balance the advantages and disadvantages of live sheep export. A nationwide analysis may miss some of the local costs and benefits of live sheep exports. Future research can also be done in selected major areas that produce sheep in South Africa.</p> </abstract>

Analysis of the economic effects of China-Japan tariff concessions on Mechanical and electrical products under RCEP framework Based on the SMART model

Based on the partial equilibrium model, this paper uses the SMART model to simulate the economic effects of different tariff concessions between China and Japan on both Chinese and Japanese Mechanical and electrical products under the RCEP framework. The results of the study show that China obtains larger trade effects relative to Japan after the RCEP comes into effect, because 91.3% of the Mechanical and electrical products exported from Japan to China have been liberalized before the RCEP comes into effect, and the Mechanical and electrical products exported from Japan to China are fully liberalized after the RCEP comes into effect, while China sets a transition period for tariff concessions and maintains a benchmark tariff for Mechanical and electrical products exported from Japan. China has not fully liberalized its exports of E&E products to China even after the transition period of tariff concessions. Therefore, if China fully liberalizes its E&E products to Japan based on reciprocal tariffs, China will gain more trade creation effect than trade diversion effect. Although a trade agreement would lower the tariff revenue of both countries, the economic welfare effect would be further enhanced. Finally, this paper proposes relevant policies and recommendations.

The location and capacity-dependent price impacts of biofuel production and its effect on the forest industry

Forest-based biofuel stands out as a promising solution to avoid fossil emissions in parts of the transport sector. Biofuel production will need large amounts of forest biomass, collected from a large area. Roundwood is costly to transport compared with other goods. Therefore, the location of forest-based biofuel production is a crucial part of an investment decision. This study analyses the optimal location of biofuel plants in Norway and the implications for the traditional forest sector in the Nordic countries. We test different numbers of production units, different sizes of the units, and various raw materials. The study applies a partial equilibrium model that covers the Norwegian and Nordic forest sectors, with 356 regions in Norway. The results indicate that small biofuel plants have the potential to turn exporting regions into importing regions. Larger biofuel plants are suitable for areas with large harvest activity today or regions with access to harbour or timber terminals along railways. We find that forest owners close to a biofuel plant will profit the most from biofuel production. Policymakers and investors should take into account that different locations and production capacities have different impacts on the forest sectors.

Модель розвитку венчурного бізнесу

The goals of the article are to study the functioning of venture business in Ukraine, as well as the market of electric cars, its state and dynamics. The purpose of the article is to create effective mechanisms for the formation and development of venture structures, as one of the strategic entities of the economy of Ukraine, through investing in the market of electric cars, which are more environmentally friendly compared to cars with an internal combustion engine (ICE), in Ukraine through modeling . Taking into account the role and importance of the formation and development of venture structures, a modified multi-criteria optimization model of the development of venture structures and their impact on sustainable development (economy, ecology and society) was developed, based on the conceptual provisions formed by the author regarding the conditions of operation of venture structures and the electric car market, and the theoretical basis the concept of sustainable development of the Brundtland Commission (the UN Commission on Sustainable Development, based on the concepts of N. Georgescu-Rogen, K. Boulding, G. Ayres and L. Kohrsen) and the Arrow–Debray model of partial economic equilibrium are used. Today, the global automotive market is developing in anticipation of restrictions on the use of gasoline and diesel fuel and the transition to electric vehicles and hybrids. Ukraine has all the necessary capacities for the production of electric vehicles, although the production is expensive and expensive, there are also the necessary capacities for the development of the infrastructure for electric vehicles. Considering the above, it is expedient to develop the production of electric cars in Ukraine, as well as the infrastructure for electric cars (chargers, components for them, etc.) through venture business investments. In order to stimulate the development of the production of electric cars, chargers, and accessories for them in Ukraine, which will make it possible to create new jobs and increase the share of car manufacturing and related industries in the country's GDP through inclusion in the value added chains of global car manufacturers, it is urgent to develop a development concept venture structures and their impact on sustainable development (economy, ecology and society). Taking into account the role and importance of the formation and development of venture structures, as one of the strategic participants in market relations, and the growing need for the functioning of the “green” economy in the direction of the development of the electric vehicle market through the investments of venture structures, special attention is paid to the modeling of their development. The developed modified multi-criteria optimization model of the development of venture structures and their impact on sustainable development (economy, ecology and society) is based on the conceptual provisions formed by the author regarding the conditions of operation of venture structures and the electric car market, and the concept of sustainable development of the Brundtland Commission (UN Commission on sustainable development, based on the concepts of N. Georgescu-Rogen, K. Boulding, G. Ayres and L. Kohrsen) and the Arrow–Debrey model of partial economic equilibrium. The model describes the market interaction of stakeholders and the relationship between the three elements of sustainable development, manifested in three effects: economic, environmental and social, which can be evaluated through the corresponding results. The model can be interpreted as an analytical reflection of the process of formation and development of venture structures on the stock market during a one-year cycle of interaction of subjects of the market economy. The reflection in the model of restrictions that describe the role of stakeholders in the process of finding a partial equilibrium contributes to increasing its adequacy to real market conditions.

IMPLICATIONS OF UNITED STATES STEEL TARIFFS ON INDIAN STEEL IMPORT PATTERNS: A CASE OF INDIA’S PREFERENTIAL TRADE AGREEMENTS AND INTERNATIONAL TRADE LAW

The study has attempted to analyse the factors responsible for the surge in imports of steel products in India immediately after the implementation of tariffs on steel products by the United States under Section 232 of the Trade Expansion Act of 1962. To identify the factors, the study has mainly utilized Bilateral Revealed Comparative Advantage, Export Intensity Index, and SMART partial equilibrium modelling tool as methodology. The key finding of the study shows that India witnessed a sudden surge in imports post the implementation of these tariffs, specifically from its preferential trade partners. India’s preferential trade partners enjoy a significant comparative advantage in steel products and have a very high export intensity in India. These countries were also found to be having very high exports to production ratios. It was also revealed that due to the reduction of import tariffs by India, there will be a significant increase in the imports of steel products, not only due to trade creation but also due to significant trade diversion. The study also looked at the compatibility of these tariffs with the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) law and WTO rulings on these measures to suggest key trade policy measures that can be adopted by India to counter such situation in future. The study suggested two key policy measures that could be adopted by India in the future to tackle any such measures: one is the Auto-Trigger Safeguard Mechanism (ATSM) & the other is the imposition of Suo Motu safeguard measures on steel products.

How do government transfer payments affect retail prices and welfare? Evidence from SNAP

We study the effect of the Supplemental Nutrition Assistance Program (SNAP) on retail prices nationwide. State-level program adjustments motivate our identification strategy. A 1% increase in benefits per population raises grocery prices by a persistent 0.08%. A calibrated partial-equilibrium model implies a marginal benefit dollar raises a recipient’s consumer surplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAP consumer’s surplus by $0.05, because of a large marginal-propensity-to-consume-food out of SNAP, low elasticities of demand, and moderate market power. To guarantee the real intended spending power on food, benefits should be increased by 7%.

Effects of Maize Importation on the Economic Welfare of Maize Producers and Consumers in Kenya: A Partial Equilibrium Model Approach

Summary Maize imports bridge the maize supply-demand gap in Kenya. However, this does not automatically imply any positive or negative effects of such imports on the economic welfare of maize producers and consumers in the country. Nevertheless, there is a limited body of literature dealing with maize importation effects on the economic welfare of maize producers and consumers in Kenya. This paper provides the empirical evidence of maize importation effects on the economic welfare of Kenyan maize producers and consumers. For the purpose of determining such effects, time series secondary data for the period 1963–2016 (FAOSTAT, World Bank and Kenya National Bureau of Statistics) and the partial equilibrium model were used (which is suitable for measuring the effects of pricing policies on specific sectors, allowing for perfect substitutability between domestically produced and imported goods). The maize imports in Kenya were found to yield ambiguous effects on the economic welfare of both maize consumers and producers in the country. The consumer surplus calculated gained only the compensated loss in the producer surplus in 2 out of 11 points of analysis. Conversely, the producer surplus calculated gained only a compensated loss in the consumer surplus in 1 out of 11 points of analysis. The resultant net economic welfare effect of maize importation in Kenya was found negative, indicating adverse impacts on both the Kenyan maize sector and economy as a whole. To ensure the sustainability and development of the maize sector in Kenya, further maize imports are considered not feasible without compensating the losses in the country’s maize sector. Therefore, complementary reforms should be introduced to forge a link between world and consumer prices, and encourage producers to respond to production incentives. This will not only benefit maize producers and consumers, but will also facilitate the efficient allocation of resources for the improvement of the maize sub-sector competitiveness.

Impact of Free Trade Area on Trade, Revenue and Welfare in Nigeria

This study offers an analytical evaluation of the effects of Free Trade Area (FTA) agreements on trade, revenue, and welfare in Nigeria. The study applied World-Integrated Trade Solution/Software for Market Analysis and Restrictions on Trade (WITS-SMART), anchored on a partial equilibrium model (PEM) for its simulations. The study simulated 100% tariff elimination on selected products under Harmonized System (HS)-2 classification code sourced from Trade Analysis Information Systems (TRAINS) and Common Format for Transient Data Exchange (COMTRADE). The study’s findings show that the African Continental Free Trade Area (AfCFTA) agreement will benefit Nigeria’s economy from trade creation estimated at US$8,860.419 million, including a favorable welfare gain to the value of US$740.571 million. Nevertheless, Nigeria will sustain losses in trade revenue, valued at US$6,142.061 million. The study recommends proficient revenue management and well-diversified revenue collection sources, such as improvement in Value Added Tax and Ad-Valorem duty, to cushion the effects of the revenue loss resulting from tariff elimination in the FTA. JEL Classification F1, F2, F4, F5, F6, I3

Agricultural and Forestry Biomass for Meeting the Renewable Fuel Standard: Implications for Land Use and GHG Emissions

Agricultural land and forestland are considered as two largest potential biomass sources for meeting the Renewable Fuel Standard (RFS) mandate for cellulosic biofuels. However, the land use change and greenhouse gas (GHG) savings with both agricultural and forest biomass production are yet to be examined systematically. This paper examines the effects of implementing a 16-billion gallon (60 billion liters) cellulosic biofuel mandate by 2035 on the mix of agricultural and forest biomass, land use change and GHG emissions by using a dynamic partial equilibrium model of the agricultural, forestry and transportation sectors in the US. Our results show that crop residues play a significant role in supplying cellulosic ethanol before 2030, while energy crops are the major feedstocks used for meeting the RFS cellulosic mandate after 2030. Milling and logging residues are economically viable supplements to agricultural biomass for cellulosic ethanol production, though their role in total biomass is small. Across different scenarios of cellulosic ethanol mandate that can be met with either agricultural biomass only or with both agricultural and forest biomass, we find GHG savings from displacing the gasoline range from 0.61 to 0.82 B MgCO2e over the 2015–2035 period. Induced land use change effects associated with expanded feedstock production are modest between and within the agricultural and forestry sectors. We conclude that a mixed feedstock base maximizes the economic and environmental benefits of cellulosic biofuel production. The mitigation potential of cellulosic biofuels is severalfold larger than natural-based solutions such as grassland restoration.

Shrinking Working-Age Population and Food Demand: Evidence from Rural China.

China is facing a rapidly aging population, and the proportion of the working-age population (WAP) is showing a decreasing trend. In this study, we use a two-stage budgeting quadratic almost-ideal demand system framework to estimate the distribution of food demand elasticity under different proportions of the WAP in rural China. The results show that the income elasticities of rural residents' demand for fruits and vegetables, animal products, oils and fats, and grains were 0.73, 0.65, 0.55, and 0.48, respectively. Additionally, the income elasticity of rural residents tended to increase as the household proportion of the WAP decreased. These results can provide a deeper understanding of the food consumption patterns of rural residents in China, and could be used in general or partial equilibrium models to forecast food supply and demand.

OPTIMAL INVESTMENT IN INTERRELATED PROJECTS

This paper addresses the effects in partial equilibrium models of relaxing one of the critical underlying assumptions of [A. K. Dixit & R. S. Pindyck (1994) Investment Under Uncertainty. Princeton: Princeton University Press] to investment under uncertainty: either the potential investor has access to a single project or can consider competing (or complementary) projects independently. This paper studies the investment decision of a multi-product monopolist where the projects exhibit interdependence between the cash flows of different products. We derive the optimal entry time for each product and show that the choice and investment timing differ from that suggested by the single project approach. It is well known that the decision to produce related goods simultaneously or sequentially crucially depends on their degree of substitutability or complementarity. We derive the optimal timing for the investment under this scenario.

How to design renewable energy support policies with imperfect carbon pricing?

Based on the emission trading scheme (ETS), this study built a design framework of renewable energy support policies (RES), which is employed to assess the interaction between RES and ETS. For RES, we consider two policy instruments: feed-in-tariff (FIT) and renewable portfolio standards (RPS). Based on the partial equilibrium model, taking the case of China’s electricity market, this study quantitatively discusses the implementation effects of six different policy mix scenarios from three aspects: emission reduction, production of green electricity, and social welfare. According to the results, there were big differences among the implementation effects of different RES instruments based on ETS. The renewable subsidy policy, on the whole, is better than renewable portfolio standards in terms of emission reduction, but worse in terms of improving the production of green electricity. In addition, different from the renewable subsidy policy, the renewable portfolio standards can reduce social welfare. When the emission quota is eased, RES can be implemented to significantly improve social welfare. These simulation results inspire China for the design of effective energy policies.

Evaluating the impacts of technological progress on agricultural energy consumption and carbon emissions based on multi-scenario analysis.

Analyzing the impacts of technological progress on agricultural energy consumption and carbon emissions is of great significance for the development of low-carbon agriculture. Most of the existing studies focus on the agricultural sector level and lack of assessment of the impacts of technological progress on agricultural energy use and carbon emissions from the perspective of crops. In this study, we evaluated the impacts of technological progress on the energy consumption and carbon emissions of main crops in China under energy intensity constraints using a price endogenous partial equilibrium model with scenario analysis. We found that China's agriculture will have the highest yield and social welfare in 2025 under the production technological progress scenario, which will be 695.44 million t and 287.91 million yuan. Energy consumption for production will be the least under the energy technology progress scenario, which will be reduced by 9.02 million t ce or 16.01% compared to the baseline scenario. Under energy intensity constraints, synergy progress in production and energy technology will be the most effective way to reduce carbon emissions in the agricultural sector. Compared to the baseline, China's agricultural sector will reduce carbon emissions by 22.18 million t c in 2025 under the synergy scenario, a decrease of 16.18%. Therefore, we suggested that China's agricultural sector should pay more attention to the synergetic development of agricultural energy and production technology to further reduce carbon emissions and promote the development of green agriculture.

Exporting costs and multi‐product shipments*

AbstractIn this paper, employing transaction‐level data for Russian imports, we explore the role of multi‐product shipments in explaining shipping patterns across countries. In our data, an average shipment includes five different products. We document that firms from higher‐income countries on average include a larger number of different products into a single shipment and have a larger number of shipments per period with a lower average quantity and value. We then propose a mechanism that reconciles both facts. Specifically, multi‐product shipments allow firms to split fixed costs per shipment across many products and, therefore, reduce total shipment costs. As a result, higher‐income countries tend to have lower fixed costs per shipment. Finally, we construct a simple partial equilibrium model that enables us to quantify the potential increases in trade volumes and welfare created by the multi‐product shipment option.

The effect of plastic packaging recycling policy interventions as a complement to extended producer responsibility schemes: A partial equilibrium model

Extended producer responsibility (EPR) schemes have effectively increased the plastic waste that is separately collected. However, due to the structure of the recycling industry, EPR cannot increase recycling rates up to the target levels.Additional policy instruments to increase recycling rates such as recycled content targets, green dot fees bonus for recycled content, recycling targets and taxes on non-recycled plastic packaging have been discussed on a political level in the last years. However, very little research has quantitatively studied the effectiveness of these policy interventions.Using a partial equilibrium model, this paper examines the effectiveness of the implementation of the aforementioned policy instruments to increase recycling rates and the impact on different stakeholders of the value chain: plastic producers, consumers, producer responsibility organization and recyclers.Results show that direct interventions (recycled content standards and recycling targets) have the benefit of decoupling the recycling industry from external markets such as the oil market. They can be a good starting point to increase recycling, but in the long term they may be restricting by not presenting incentives to achieve recycling levels beyond the targeted amounts and by limiting technological innovation. On the contrary, economic interventions such as a green dot fee bonus or a packaging tax create economic incentives for recycling. However, these incentives are diminished by the lower perceived quality of packaging with higher recycled content levels.

How big a drop in agricultural exports to the United Kingdom after Brexit? Simulations for sensitive products of four Visegrad countries.

After the European Union (EU) was left by the United Kingdom (UK), a free trade area was established between these economies. Although bilateral trade in all goods is tariff-free, regulatory requirements make exports more costly and burdensome. We used a partial equilibrium model to analyze the implications of Brexit for agricultural exports from Visegrad countries (Czechia, Hungary, Poland and Slovakia). We assess trade creation and trade diversion effects resulting from an increase in non-tariff measures and border costs for 4-digit agricultural products identified as sensitive in each of the Visegrad countries. The simulations reveal that exports of sensitive products from Visegrad countries to the UK could decrease by up to 20%. While the macroeconomic importance of this change is not significant, for the producers of the sensitive goods such export losses are substantial.