Dynamic physical analysis of long term economy-environment options

• Main Author: Ryan, Grant James
• Language: en
• Published: University of Canterbury. Chemical Engineering 2010
• Online Access: http://hdl.handle.net/10092/4375

This thesis presents a methodology for structural economy-environment simulation modelling (SEESM), and a demonstration of its application to New Zealand. The problem analysed in this thesis is the identification of long term physical limits on economic growth; in particular, a joint physical analysis of economic growth, technological development and resource scarcity. It is important to analyse physical causes of technological change as this is an area the conventional economic growth models ignore. A growth model has been developed that includes physical influences on technological development while still recognising that investment accelerates the learning process. Although no clear conclusion can be made about the link between technological progress (learning) and energy analysis this is a promising area for further investigation. The dynamic simulation modelling approach developed by Malcolm Slesser and others (ECCO) is reviewed, and a number of shortcomings identified. Three significant modifications are presented. First, growth in the new models is based on the neoclassical idea that technology is the main driver of economic growth rather than on classical growth theory which emphasis savings as the main determinant of growth. Secondly, the numeraire used in the models is a dimensionless index of volume so the model does not assume an energy theory of value. Finally, the model is based on a full set of input-output data which enables a more accurate analysis of flows between sectors in the economy. Thus, it has the advantage of the detailed structural information found from input-output analysis combined with the flexibility of simulation models. The resulting model is ideal for investigating the complex dynamic phenomenon of an evolving physical economy. The purpose of this model is not to predict future economic growth but to highlight the physical assumptions required for any particular scenario. Once these physical assumptions have been identified, they are open to scrutiny and can easily be changed to test their importance. A dynamic input-output model has been applied to the New Zealand economy and several different scenarios have been tested. The simulations include changing the overall growth rate of the economy, changing relative growth rates of different sectors, changing energy efficiencies, and introducing renewable energy technologies on a large scale. These simulations show that in some cases there are significant indirect physical flows that may not have otherwise been accounted for.