Inventory and review of economic and commodity forecasting models and services

180 Pages·1993·4.9 MB·English

by  Apogee Research International Limited

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INVENTORY AND REVIEW
OF ECONOMIC AND COMMODITY
FORECASTING MODELS AND
SERVICES
APRIL 1993
®
Ministryof
Ontario Environment
and Energy
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ISBN 0-7778-0514-6
INVENTORY AND REVIEW
OF ECONOMIC AND COMMODITY
FORECASTING MODELS AND SERVICES
APRIL 1993
Cettepublication technique
n'est disponible qu'en anglais.
Copyright: Queen's Printer for Ontario, 1993
This publication may be reproduced for non-commercial purposes
with appropriate attribution.
PIBS 2340

INVENTORY AND REVIEW
OFECONOMIC AND COMMODITY
FORECASTING MODELS AND SERVICES
Report prepared for:
Economics Office
PolicyDevelopment and Intergovernmental Relations Division
Ontario Ministry ofEnvironment and Energy
Report prepared by:
APOGEE Research International

TABLE OF CONTENTS
1.0 Background and Purpose l
2.0 Methodology 4
3.0 OverviewofResults 6
4.0 Iron and Steel 7
5.0 Petroleum Refining 8
6.0 Organic and Inorganic Chemicals 9
Model ofEconomic-Energy-Chemicai Interactions (ProbeEconomics Inc.) 10
7.0 Pulp and Paper 13
FORGEM 1.0 (ForestryCanada) 14
EconometricModelofthe Pulpand PaperIndustry (MinistryoftheEnvironment) 17
8.0 Metal Mining 22
SecondarySupplyofCopperand Ferrous Metals (CentreforResourceStudies) 24
ResourceStrategies Inc 26
BrookHunt&Associates Limited 30
9.0 Industrial Minerals 31
10.0 Metal Casting 32
11.0 Energy and Electric Power Generation 33
OntarioMinistryofEnergy 36
OntarioHydro 39
Transportationand ResidentialEnd-UseEnergyDemandModels
(Energy,MinesandResources) 43
Industrial SectorTechnologyUseModel (Energy,Minesand Resources) 46
InterfuelSubstitution DemandModel (Energy,MinesandResources) 49
IntegratedModel ofAlberta (EnergyResourcesConservation Board) 52
SERF,MARKALandMarfoekResources 55
12.0 Recreation and Tourism
1.0 Background and Purpose
Background: Economic and Commodity Forecasting Models
Economicmodelsconsistofoneormoreequationswhichestimatethevaluesofendogenouseconomic
variablesasfunctionsofexogenousvariables.
Economicmodelsareusedforavarietyofpurposes. Threeoftheirmost importantusesare:
• forecasting: predictingthefuturevaluesofeconomicvariables;
• simulations: estimatingthe effectsofshocksuponeconomicactivity,and
• testingeconomictheory: constructingmodelstoverifyhypothesesregardingtheway
economicforcesaredeterminedandinteract.
Such modelsmaybeusefultoenvironmental policymakersforsimilar reasons. Specificapplications
ofmodelstoenvironmentalpolicyissuesinclude:
• forecastingemissionsbyapplyingemissionsfactorstoproductionforecasts;
• simulatingtheeconomiceffectsofenvironmentalprotectionmeasuresuponregulated
industries;and
• estimatingthepotentialbenefitsofenvironmentalregulationsintermsoftouristand
recreationalactivities.
Eachoftheseapplicationsdemandsmodelswithcertainattributes,perhapsthemostimportantofwhich
istheirlevelofaggregation.Themosthighlyaggregatedmacroeconomicmodelsmayincludeonlyone
productionfunction forthe entireCanadian economy. Sincethese modelswere constructedin order
toestimatetheimpactofvariouspubUcpoliciesonthemacroeconomy,theyareabletosimulatesome
ofthe effects ofenvironmentalprotectionpolicies on awide range ofeconomicvariables. However,
forecastsofoutputeffectsattheeconomy-widelevelarelikelyoflimiteduseinpredictingcontaminant
emissionsordischarges.
Other models provide estimates of output at the sectoral level. Since environmental protection
regulationsimpactverydifferentlyupondifferentsectors,sectoraldetailisessentialformanypurposes,
includingthosementionedabove.
However, even output at the industrial sector level may be too highly aggregated for some of the
Ministry's purposes. Since industries are generally defined to encompass at least several products,
substantialvariationincontaminantdischargesmayexistbetweenproductionunitswithineachsector.
For example, a model ofthe pulp and paper industrymay disaggregate the sector by production of
newsprint,woodpulp,paperboard, etc. Aseparateemissionscoefficient foreachproductwouldallow
forecasts oftotalcontaminantdischargestofluctuatewiththecomposition ofeachsector'soutput.
A final level of disaggregation, namely by type of production process, has also been shown to be
significantinprojectingemissionloadings. Significant differencesinemissionsoftenoccurasaresult
1.0 BackgroundandPurpose
ofdifferences in technology employed. Tliis implies that the ideal data set to forecast contaminant
emissionsshouldalsoincludecommodityforecastsbyproductionprocess.
The Ministry's Use ofthese Models
TheMinistryuseseconomicandcommodityforecastingmodelsfortwomainpurposes:
• to simulate the economic effects of enviroiunental protection measures upon regulated
industriesandothersectors; and
• to forecast emissions of pollutants of concern by applying emissions factors to predicted
production,withtheproductionforecastsbeingderived(implicitlyorexpUdtly)fromeconomic
and/orcommoditymodels.
An example ofthe first use is the Ministry's analysis ofthe effects on the Ontario pulp and paper
industryofincreasedenvironmentalprotectionmeasures.
An example ofthe second useis presented in Exhibit 1.1, which isa simplified overviewofhowthe
Ministry'sAirResourcesBranchestimatescurrent and future emissions ofinterest. Itis instep5of
thisexhibitthatMinistrystaffestimatethefuture emissionsofpollutants,anditisthisstepthatcould
benefit fromtheuse ofeconomicandcommodityforecastingmodels.
Purpose
Therangeofmacroeconomicandcommodityforecastingmodelswhichcouldpotentiallybeusedbythe
Ministry is quite broad. Moreover, the uses, appUcations and complexities ofthese tools have been
increasingrapidly. WhattheMinistryrequiresisaclearerunderstandingoftheavailabilityandnature
ofexistingmodelssoitcanbetterutilizeexistinginformationsoiu-ces.
Thepurposeofthisprojectistwofold.
• It provides an inventory ofeconomic and commodity forecastingmodels which could or do
incorporaterelevantvariablesanddatarelatingtoOntario(ie.economic,enviromnental,energy
andtourism).
• Second,itassessescriticallyaselectednumberofthesemodelsinordertoprovidetheMinistry
withaclearunderstandingoftheattributesofthemodelsmostcloselysuitedtotheMinistry's
needs.
Asaresult. Ministrypersonnelwillbebetterabletoutilizethemodelstofurthertheirenvironmental
economicevaluationneeds.
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