Targets IMage Energy Regional (TIMER) Model, Technical ...

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page 120 of 188 RIVM report 461502024 7KHWUDGHPRGHOVLQ7,0(5 The trade module as developed for <strong>TIMER</strong> differs from most models as we do not apply the traditional equilibrium approach. In global trade models - for energy or other goods - the starting point is usually an optimisation routine in which the prices of the goods change in such a way that an equilibrium between supply and demand holds (e.g. Edmonds, 1985; CPB, 1995). The trade module of <strong>TIMER</strong> is a rule-based model where the market-shares are basically dependent by seller prices (which almost equal production costs – see &KDSWHUDQG, instead for the ‘cartel’ regions discussed in the previous paragraph). In a rule-based approach such as ours, relatively simple behavioural rules are incorporated in the model as a representation of ‘real-world’ agent behaviour. Of course, in reality the behaviour of the agents is far more complex. The reality of modelling is that intelligent and strategic behaviour can not be simulated adequately in a world energy model. Besides, the decisions of the agents depend also on other issues than energy policy alone. However, by extracting what we think is the kernel of their strategies we are able to simulate some essential aspects of fuel trade. In a way, we try to take up the point made by Adelman (1993b) that “0RGHOOLQJ D VXSSO\ V\VWHP PXVW LQFOXGH ZRUOGZLGHGHYHORSPHQWLQLQYHVWPHQWRSHUDWLRQFRVWVEXWDOVRWKHXQERXQGXQVWDEOHFDUWHO DQG WKH XQGHUDFKLHYLQJ QRQFDUWHOLVWV 0RGHOV ZKLFK GLVUHJDUG WKHVH SUREOHPV DQG LQVWHDG DGGUHVVµJHRORJLFDODVVHVVPHQWVKDYHQRWLHWRUHDOLW\DQGZLOOJLYHXVQRLQVLJKWVOHWDORQH QXPEHUV”. The trade models for all different fuels (oil, coal, natural gas, bioliquid fuels and biogaseous fuels) consist in principle of the following steps: 1. Determination of those regions that have much lower production costs than the main consuming regions – which could lead to cartelisation (only actively used for oil); 2. Determination of the market shares of all regions in all 17 markets based on selling prices (which might be increased with a cartel bonus) and transport costs; 3. Redistribution of market shares of regions that participate in a producers cartel (only used for oil); 4. Blocking imports to regions that have (assumed) active import barriers; 5. Blocking exports from regions that (assumedly) decide not to export to the world market (or limit their exports and producing capacity); These different steps are discussed below. ,GHQWLI\LQJWKRVHUHJLRQVWKDWPLJKWEHQHILWIURPFDUWHOLVDWLRQ One of the important aspects of the international fuel markets is the existence of oligopoly power. Some regions with low-cost fields may exact high royalty payments if demand on the world market is high enough to support such oligopolistic rents. The interplay between producer countries, consumer countries and multinational fuel firms is an intricate one with complex and changing rules (see e.g. Abdalla, 1995; Austvik, 1992; Gochenour, 1992; Greene, 1998; Stevens, 1997a). We have designed a simplified scheme to simulate this part of the energy system. We identify those regions that might consider supplying their resources at higher prices than their producer costs. From the production submodels, we know the average prices for energy carriers for the different regions. From this information, we can calculate the average world oil price without trade (a demand-weighted average):
RIVM report 461502024 page 121 of 188 :0 Pr LFH:7 = ∑ GHPDQG * SULFH / 5 5 ∑ GHPDQG $/GJ (7.1) 5 5 5 Regions that have much lower prices (determined by a threshold fraction β) than WMPriceWT can be identified as potential exporter regions. If these regions are able to make some form of mutual agreement to limit price competition, they can supply their resource at prices based on what consumers are willing to pay instead of their own production costs. For oil, we assume that such cartel is active. This limits their market share but increases their profits per unit of resource sold. The trade price at which the exporter group offers fuel on the world market, ExpTradePrice, is calculated as the marginal cost at which this group produces plus a part of the difference between this marginal cost and the WMPriceWT. In formula: ([S7UDGH Pr LFH = β *:0 Pr LFH:7 $/GJ (7.2) for those regions for which DomPrice i < β WMPriceWT. In this way the low-cost producers capture part of the rent in the form of additional producer revenues. It should be noted that under the assumption of globalising markets, the production costs in the different regions have the tendency to converge. Low costs regions will have larger market shares, and thus the depletion formulation will have a larger impact. This means that in time, less regions will qualify for the condition to have significantly lower production costs than the average consumer price. 'HWHUPLQLQJPDUNHWVKDUHV In the next step is our assumption that the price of a fuel of region i on the market of region j is equal to the fuel supply costs in region i plus the transport costs from region i to j. We call this price the trade price of the fuel, TradePrice. Within the region, there are also transport costs. There may also be taxes and subsidies within the region; for instance, some regions may reduce the prices for reasons of employment as is the case in the German coal industry. These are added exogenously to the domestic fuel supply costs as non-zero premium factors reflecting subsidies, royalties or (windfall) profit margins. The price at which a region i offers fuel on the world market, TradePrice, is in first instance set equal to the domestic price in the other region j plus transport costs from region j to I (TC ij ). We will discuss these transport costs in more detail further in this Chapter Hence: 7UDGH Pr LFHLM, W 'RP Pr LFH M, W 1 + 7& LM, N, = − for DomPrice i > β WMPriceWT W 7UDGH Pr LFHLM, W = ([S7UDGHPr LFH M, W−1 + 7& LM, N, W for DomPrice i < β WMPriceWT $/GJ (7.3) In the region itself (i=j), the TradePrice is set equal to the domestic producer price DomPrice plus added cost for inland transport to markets and ports.
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