Energy-economy-environment modelling: A survey

Concern about fossil-fuel resource depletion in the early 1970s has led to the develop-ment of theoretical and applied economic models of energy–economy linkages with a detailed representation of the energy market. Pioneering energy–economy modelling eff orts focused primarily on the representation of scarce resources such as oil and its impact on world economies. More recently, not only the scarcity of energy resources, but also other natural resources in the environment played a major role in economic model-ling. The complexity of models has increased considerably, especially in areas relating to global environmental issues such as acid rain, ozone depletion and climate change. Take the issue of climate change as an example. Here, it is generally agreed (or assumed) that one of the important cause of this likely phenomenon is anthropogenic greenhouse gas (GHG) emissions which originate mainly from fossil-fuel consumption. To prevent or mitigate against this likely event, integrated energy–environmental strategies and policies are required which need to take into account the complex interactions between climate, ecological and economic systems. Such integrated policies and strategies are often studied within the framework of the so-called integrated assessment modelling (IAM) approach.1 Existing literature on IAM focuses mainly on a comparison of modelling results.2 The aim of this chapter is to provide an overview of the theoretical backgrounds, the methodologies and model designs. Section 2 explains the theories and general meth-odologies of diff erent models, and Section 3 looks at applied models. Section 4 considers some specifi c issues such as energy substitutability and the role of energy and environ-ment resources in economic models, as well as providing a brief survey of existing major energy–economy–environment models, and Section 5 concludes