Industrial sector - REMIND-MAgPIE

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Model Documentation - REMIND-MAgPIE

Corresponding documentation
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Model information
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Institution Potsdam Institut für Klimafolgenforschung (PIK), Germany,
Solution concept General equilibrium (closed economy)MAgPIE: partial equilibrium model of the agricultural sector;
Solution method OptimizationMAgPIE: cost minimization;

Demand for final energy carriers used in the industry sector (solids, liquids, gases, hydrogen, district heat and electricity) is modeled in a top-down fashion: they are input to a nested CES production function that produces GDP. Supply of these final energies is modeled in a bottom-up energy model, where detailed capital stocks of conversion technologies convert primary energies to secondary and final energies, with full substitutability between technologies. The bottom-up energy model supplying the energy carriers is described in full detail in Section “Energy conversion”.

The industry sector differentiates between two types of energy functions supplied by the final energy carriers: electricity, and energy inputs used for heating purposes (solids, liquids, gas, hydrogen, and district heat).

The industry sector requires investments and operation and maintenance payments into the distribution infrastructure (generic capacity constraint). It generates emissions that go into the climate model and, depending on the scenario, are taxed or limited by a budget.

The indirect energy use and material needs for construction of factories and machinery is not explicitly represented, only implicitly accounted for by the main CES production function, which is calibrated to the total historical energy demand of a region.

The main determinants of final energy demand in the industry sector are GDP growth, the autonomous efficiency improvements (efficiency parameters of CES production function), the elasticities of substitution between capital and energy and between industry, residential/commercial and transport energy use. These factors influence demand in a similar manner as described for the residential/commercial and transport sectors, i.e., final energy types are inputs to a CES function, the output of which is combined with energy from other sectors in another CES function to generate a generalized energy good, which in turn is combined with labor and capital in the main production function for GDP.

Emissions of the three largest industry sub-sectors (cement, chemicals and steel production) can partially be abated by the use of CCS. To that end, emissions of the sub-sectors are calculated based on region-specific sub-sector shares in the use of CO2-emitting final energy carriers (solids, liquids and gases). The share of emissions abated by CCS is determined via sub-sector specific marginal abatement cost (MAC) curves; according to the explicit or implicit CO2 price total emissions are reduced and sequestered CO2 is increased accordingly, while additional abatement costs are incurred and accounted for in the budget.

Process emissions from cement production are calculated based either on per capita GDP or on per capita investments, based on the level of economic development of a region. REMIND-MAgPIE reduces cement emissions when CO2 prices increase and thereby drive up clinker/cement prices. This reduction of cement emissions represents both a reduction in demand through improved molds and structural redesign and a reduction of emissions from changing the composition of cement. These options are represented by a MAC curve (exemplary points: 10% reduction at 30$/tCO2, 40% reduction at 200$/tCO2, 60% reduction at 600$/tCO2), and the costs for reducing cement emissions are fully accounted for in the budget equation. Additionally, process emissions from cement production can be further reduced by using CCS – the model employs the same MAC curve as for energy-use emissions in the cement sub-sector.