Economic equilibrium in LCA: assumptions, data and modelling
This course is dedicated to the modelling of markets in LCA, with special focus on the assumptions adopted and the data required. It includes both lectures and exercises.
- The role of markets in LCA – An introductory overview
- Market dynamics: Consequences of changes in supply, demand and prices
- The concept of economic equilibrium and associated modelling requirements
- Key assumptions in economic-equilibrium modelling
- Common critiques of the economic equilibrium theory
- The important distinction between short-term and long-term
- Difference and similarities between economic-equilibrium modelling and alternative life-cycle modelling approaches
- Data for market modelling: Data requirements and sources
- Examples of applications of market modelling. Application dependency of the assessment and associated modelling requirements (e.g. hot-spot-analysis, labelling, eco-design, policy support, scale of decisions supported)
- Exercise with a small 2 producers, 2 products global model.
- Scope of modelling: General and partial economic equilibrium modelling, model detail and completeness, geographical boundaries
- Identification of constraints and the consequences for modelling
- Identification, quantification and assessment of substitution by the use of elasticities and production cost functions
- Linear programming / optimisation using GAMS
- Identification of the source and magnitude of marginal supply and capacity changes
- Consumer patterns and income effects (re-bound effects)
- Transaction costs, trade and transport margins, producer’s prices and purchaser’s prices
- Sources of uncertainty and ways for addressing these
- Communication aspects
Form and academic recognition:
Form: 20 hours for lectures and exercises. Additional 5-hour follow-up course work if ECTS-points are requested.
Academic recognition: 1 ECTS-point
- Understanding of the main features, key assumptions and critiques of economic-equilibrium theory and models
- Ability to find, treat and use the appropriate data for market modelling in LCA
- Understanding the difference between economic-equilibrium modelling and alternative/complementary life-cycle modelling approaches
- Understanding the application dependency of different models and how they are used in practice.
- Ability to take into account changes in consumer behaviour
- Understanding of how the system boundaries are influenced by production constraints
- Understanding of the difference between small-scale and large-scale changes, and between changes in production capacity and changes in capacity utilisation
- Understanding the algorithms used in economic-equilibrium modelling (e.g. optimisation / linear programming)
- Understanding of the sources of uncertainty in market models and ability to quantify these
- Understanding the need for transparency in large and complex models for decision support
A good understanding and/or experience with life cycle assessment. Must bring own laptop computer with an installation of GAMS (www.gams.com).