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

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.

[1]  F. Quesnay.  Physiocratie, Ou Constitution Naturelle Du Gouvernement Le Plus Avantageux Au Genre Humain , 2012 .

[2]  M. Strubegger,et al.  User's Guide for MESSAGE III , 1995 .

[3]  Katherine E. Seiferlein,et al.  Annual Energy Review 2007 , 2008 .

[4]  F. Soddy.  Wealth, virtual wealth and debt : the solution of the economic paradox , 1927 .

[5]  David Pimentel,et al.  Biofuels, solar and wind as renewable energy systems : benefits and risks , 2008 .

[6]  Arnulf Grubler,et al.  Technology and global change , 1998 .

[7]  N. Georgescu-Roegen.  The Entropy Law and the Economic Process , 1973 .

[8]  Charles A. S. Hall,et al.  What is the Minimum EROI that a Sustainable Society Must Have , 2009 .

[9]  B. English.  Ecological Economics: The Science and Management of Sustainability , 1991 .

[10]  Alan S. Manne,et al.  MARKAL-MACRO: A linked model for energy-economy analysis , 1992 .

[11]  M. Strubegger,et al.  First-Order Effects of a Nuclear Moratorium in Central Europe , 1986 .

[12]  H. Daly.  The Circular Flow of Exchange Value and the Linear Throughput of Matter-Energy: A Case of Misplaced Concreteness , 1985 .

[13]  Robert U. Ayres,et al.  Economics and the Environment: A Materials Balance Approach , 1971 .

[14]  E. Cook.  Man, energy, society , 1976 .

[15]  S. Iniyan,et al.  A review of energy models , 2006 .

[16]  Howard T. Odum,et al.  Environmental Accounting: Emergy and Environmental Decision Making , 1995 .

[17]  Keywan Riahi,et al.  IMAGE and MESSAGE Scenarios Limiting GHG Concentration to Low Levels , 2008 .

[18]  N. Georgescu-Roegen.  Energy and Economic Myths , 1975 .

[19]  A. Chambers,et al.  World Energy Outlook 2008 , 2008 .

[20]  D. Stern,et al.  Aggregation and the role of energy in the economy , 2000 .

[21]  Frederick Soddy.  Cartesian economics : the bearing OI physical science upon state stewardship , 1923 .

[22]  Robert U. Ayres,et al.  Exergy, power and work in the US economy, 1900–1998 , 2003 .

[23]  C. Hall,et al.  Ecosystem Modeling in Theory and Practice: An Introduction with Case Histories , 1990 .

[24]  Robert U. Ayres,et al.  The Economic Growth Engine: How Energy and Work Drive Material Prosperity , 2009 .

[25]  B. Hannon.  Energy Conservation and the Consumer: A tax placed on energy and adjusted to wage levels would ease a change to a more labor intensive economy. , 1975, Science.

[26]  Jyotirmay Mathur,et al.  Development of a modified dynamic energy and greenhouse gas reduction planning approach through the case of Indian power sector , 2001 .

[27]  John Bratland,et al.  Beyond oil: The threat to food and fuel in the coming decades : by John Gever, Robert Kaufman, David Skole and Charles Vorosmarty Ballinger, Cambridge, MA, 1986, 304 pp , 1986 .

[28]  John Peet,et al.  Energy and the ecological economics of sustainability , 1992 .

[29]  C. Hall,et al.  Energy and Resource Quality: The Ecology of the Economic Process , 1992 .

[30]  Paul Ekins,et al.  The economic growth engine: how energy and work drive material prosperity , 2010 .

[31]  Charles A. S. Hall,et al.  Peak Oil, EROI, Investments and the Economy in an Uncertain Future , 2008 .

[32]  J. Laherrère,et al.  The End of Cheap Oil , 1998 .

[33]  Hidefumi Imura,et al.  Physical energy cost serves as the “invisible hand” governing economic valuation: Direct evidence from biogeochemical data and the U.S. metal market , 2008 .

[34]  Pat Bodger,et al.  Dynamics of an energy-economic system subject to an energy substitution sequence , 1987 .

[35]  Robert U. Ayres,et al.  Thermodynamics and economics , 1984 .

[36]  Leo Schrattenholzer,et al.  MESSAGE-MACRO: Linking an energy supply model with a macroeconomic module and solving it iteratively , 2000 .

[37]  Alan S. Manne,et al.  MARKAL-MACRO: An overview , 1992 .

[38]  Ad Seebregts,et al.  Energy/Environmental Modeling with the MARKAL Family of Models , 2002 .

[39]  Maryse Labriet,et al.  ETSAP-TIAM: the TIMES integrated assessment model Part I: Model structure , 2008, Comput. Manag. Sci..

[40]  M. Gilliland,et al.  Energy Analysis and Public Policy: The energy unit measures environmental consequences, economic costs, material needs, and resource availability. , 1975, Science.

[41]  Nebojsa Nakicenovic,et al.  An Assessment of Technological Change Across Selected Energy Scenarios , 2001 .

[42]  Roger Bentley,et al.  Assessing the date of the global oil peak: The need to use 2P reserves , 2007 .

[43]  Robert U. Ayres,et al.  Eco-thermodynamics: economics and the second law , 1998 .

[44]  C. Cleveland.  Net energy from the extraction of oil and gas in the United States , 2005 .

[45]  Judith Gurney.  BP Statistical Review of World Energy , 1985 .

[46]  Mikael Höök,et al.  The Peak of the Oil Age : Analyzing the world oil production Reference Scenario in World Energy Outlook 2008 , 2010 .

[47]  Nebojsa Nakicenovic,et al.  Global energy perspectives: A summary of the joint study by the international institute for applied systems analysis and world energy council , 1996 .

[48]  Cutler J. Cleveland,et al.  When, where, and by how much do biophysical limits constrain the economic process?: A survey of Nicholas Georgescu-Roegen's contribution to ecological economics , 1997 .

[49]  Cutler J. Cleveland,et al.  Biophysical economics: Historical perspective and current research trends , 1987 .

[50]  C. Hall,et al.  Energy and the U.S. Economy: A Biophysical Perspective , 1984, Science.

[51]  R. Costanza,et al.  Embodied energy and economic valuation. , 1980, Science.

[52]  Tieju Ma,et al.  Technologies as agents of change: A simulation model of the evolving complexity of the global energy system , 2008 .

[53]  Bruce M. Hannon.  Energy, growth, and altruism , 1981 .

[54]  F. Cottrell,et al.  Energy and Society: The Relation Between Energy, Social Change, and Economic Development. , 1956 .

[55]  J. Farley,et al.  Ecological Economics : Principles and Applications , 2016 .

[56]  C. Cleveland,et al.  An exploration of alternative measures of natural resource scarcity: the case of petroleum resources in the U.S. , 1993 .

[57]  D. Meadows,et al.  The Limits to Growth , 2018, Green Planet Blues.

[58]  Leo Schrattenholzer,et al.  The Energy Supply Model MESSAGE , 1981 .

[59]  Paul Bairoch,et al.  World energy production, 1800-1985 =: Production mondiale d'énergie, 1800-1985 , 1991 .

[60]  Can the world make the transition to a sustainable economy driven by solar energy , 2014 .

[61]  Herman E. Daly,et al.  Steady-state economics: The economics of biophysical equilibrium and moral growth , 1977 .

[62]  E. Neumayer.  Weak Versus Strong Sustainability: Exploring The Limits Of Two Opposing Paradigms , 2010 .