Fossil energy resources - GCAM
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|Pacific Northwest National Laboratory, Joint Global Change Research Institute (PNNL, JGCRI), USA, https://www.pnnl.gov/projects/jgcri.
|General equilibrium (closed economy)GCAM solves all energy, water, and land markets simultaneously
|Recursive dynamic solution method
|GCAM is a dynamic recursive model, meaning that decision-makers do not know the future when making a decision today. After it solves each period, the model then uses the resulting state of the world, including the consequences of decisions made in that period - such as resource depletion, capital stock retirements and installations, and changes to the landscape - and then moves to the next time step and performs the same exercise. For long-lived investments, decision-makers may account for future profit streams, but those estimates would be based on current prices. For some parts of the model, economic agents use prior experience to form expectations based on multi-period experiences.
GCAM models depletable resources (oil, unconventional oil, natural gas, coal, and uranium) using graded resource supply curves. The fossil resources are produced from these supply curves using a “Resource / Reserve” model. In this approach as the market price of the resource increases, we look up the supply curve to determine the additional quantity available and move that quantity of “resource” into a “reserve”. We assume production of that reserve over some well / mine lifetime appropriate for each fuel. Technical change can be applied to reduce the extraction cost of the “resource” in future years. See depletable resources for a full description and examples.