Transcript In scenario 1

INDONESIA'S MORATORIUM ON PALM OIL
EXPANSION FROM NATURAL FOREST:
ECONOMY-WIDE IMPACT AND THE ROLE OF
INTERNATIONAL TRANSFER
MARK HORRIDGE*, ARIEF A.YUSUF**, LOUISE ROOSE*,
*) COPS,VICTORIA UNIVERSITY, **) UNIVERSITAS PADJADJARAN
Stopping Deforestation in Agricultural Supply Chains in Indonesia: A Modeling Workshop
December 11, 2014, Jakarta
Environmental Defense Funds – World Resource Institute
THIS PRESENTATION IS ABOUT:
1. What is IndoTERM model?
2. Analysis of palm-oil land moratorium using IndoTERM
model
INDOTERM
Recursively run for
every year toward 2030
through capital
accumulation and other
dynamic mechanism
Regions are connected
through inter-regional
trade of commodities
and factors
Each region is
modeled as a
separate
economy, prices
are different
across regions.
is a dynamic inter-regional, bottom-up,
computable general equilibrium (CGE) model of
the Indonesian economy
A large system of nonlinear equation solved
by specialized software
Cover the whole
national economy,
generating standard
macroeconomic
variables
Multi markets
175 COM
33 REG
175 IND
9 LAB
1 CAP
1 LND
IndoTERM is a mathematical model
which contains …
 many equations
(a system of non-linear equations with n equations, n endogenous
variables, and many exogenous variables)
 that determines prices and quantities
 of commodities (many of them)
 and inputs (including primary and intermediates)
 characterized by
 optimizing rational economic agents (e.g. producers and
consumers)
 who interact in a competitive market economy
 such that all the markets are in equilibrium.
INDOTERM
• A family of Australian TERM The Enermous Regional Model Developed by CoPS
(Centre of Policy Studies),Victoria University (formerly: Monash University)
• Applied in:
•
Australia, Brazil, Finland, China, South Africa, Indonesia
• In Indonesia
•
Emerald (Pambudi)
•
IndoTERM v.1 (CEDS UNPAD, CoPS, 2006)
•
IndoTERM v.2 (ADB, CoPS, CEDS UNPAD, 2012)
•
IndoTERM v.3 - Dynamic (CoPS, CEDS UNPAD, BAPPENAS, AusAID, 2013-2014)
• A result of years of collaboration among these institutions:
CoPS
INVEST(c,i,d)
purch. value of good c used for
investment in industry i in d
price: pinvest(c,d)
quantity: xinvi(c,i,d)
USER x DST
IND
COM
x
SRC
COM
x
SRC
USE(c,s,u,d)
Delivered value:
basic + margins (ex-tax)
quantity: xint(c,s,i,d)
price: puse(c,s,d)
HOUPUR(c,h,d)
purch. value of good c used by
household h in d
price: phou(c,d)
quantity: xhouh_s(c,h,d)
DST
FINDEM
(HOU,INV,
GOV, EXP)
quantities:
xhou(c,s,d)
xinv(c,s,d)
xgov(c,s,d)
xexp(c,s,d)
price:
puse(c,s,d)
=
USE_U(c,s,d)
=
DELIVRD_R(c,s,d)
=
price:
CES
pdelivrd_r(c,s,d)
quantity:
xtrad_r(c,s,d)
DELIVRD (c,s,r,d)
= TRADE(c,s,r,d)
+ sum{m,MAR,
TRADMAR(c,s,m,r,d)}
price: pdelivrd (c,s,r,d)
quantity: xtrad(c,s,r,d)
+
= {Leontief)
TAX (c,s,u,d)
Commodity taxes
TRADE (c,s,r,d)
good c,s from r to d
at basic prices
quantity: xtrad(c,s,r,d)
price: pbasic(c,s,r)
+
FACTORS
MAKE_I(c,r)
=
TRADE_D
(c,"dom",r)
IND x DST
IMPORT
(c,r)
TRADMAR(c,s,m,r,d)
margin m on good c,s
from r to d
quantity: xtradmar(c,s,m,r,d)
price: psuppmar_p(m,r,d)
file data
sum over COM and SRC
addups
TRADMAR_CS(m,r,d)
=
SUPPMAR_P(m,r,d)
MAKE(c,i,d)
output of good c
by industry I in d
update:
xmake(c,i,d)*pmake(c,i,d)
Source:
Input-Output Table, Interregional input-output table,
regional data of production,
Social Accounting Matrix, Spatial
data
+
LAB(i,o,d) wages
CAP(i,d) capital rentals
LND(i,d) land rentals
PRODTAX(i,d) prod tax
=
INDUSTRY OUTPUT:
VTOT(i,d)
=
INVENTORIES:
STOCKS(i,d)
+
COM
ORG x DST
IndoTERM Database
structure
sum over
i in IND
=
MAKE_I
(c,d)
domestic
commodity
supplies
DST
CES sum over p in REGPRD
SUPPMAR(m,r,d,p)
Margins supplied by p on
goods passing from r to d
update:
xsuppmar(m,r,d,p)*pdom(m,p)
MAKE_I(m,p) =
SUPPMAR_RD(m,p)
+ TRADE_D (m,"dom",p)
ORG x DST
Index Set Description
c COM Commodities
s SRC Domestic or imported (ROW) sources
m MAR Margin commodities
r ORG Regions of origin
d DST Regions of use (destination)
p PRD Regions of margin production
f FINDEM Final demanders(HOU, INV,GOV, EXP)
i IND Industries
u USR Users = IND + FINDEM
o OCC Skills
h HOU Households
INDOTERM CAN BE USED FOR VARIETY OF
PURPOSES
Analyzing regional
impact of national
or international
shock/policies
International
oil price
shocks
Analyzing nationwide impact of
region-specific
shocks
Analyzing impact
of improving
connectivity
Regional
policies
(regional
taxes)
Efficiency in
transport
services
Regional
specific
productivity
shocks
(draught)
Specific
sourcedestination
transport
efficiency
Import Tariff
Nation-wide
indirect taxes
Other areas
RESEARCH QUESTIONS
• What is the implication of Indonesian Moratorium on Palm
Oil Expansion from natural forest?
• To what extent international transfer can mitigate its
negative economic impact?
SCENARIOS AND ASSUMPTIONS
• In the baseline, palm oil land grow by 3-8% per year toward 2030
• ½ of the land expansion come from natural forest, another ½ from production
forest.
• In scenario 1 (S1), expansion of palm oil land from natural forest is stopped
in 2015 onward.
• In scenario 2 (S2), expansion of palm oil land from natural forest is stopped
in 2015 onward and Indonesia receives international transfers amount to
$10x[CO2 emissions avoided]
• Transfers is given directly to household in each region (in proportion to the
region’s avoided emissions) to be spent on consumption.
INCORPORATING CARBON EMISSIONS
FROM LAND USE CHANGE IN INDOTERM
1.
We estimate the carbon intensity
per ha for each region and each
land-using sector, including
natural forest area
2.
We added carbon emissions
equation, and international
transfers equation for avoided
emissions.
REGIONAL AGGREGATION FOR THIS
ANALYSIS
Western Sumatera: NAD, North Sumatera, West Sumatera, Bengkulu,
Lampung
Eastern Sumatera: Riau, Kepri, Jambi, South Sumatera, Babel
North Western Java: DKI, West Java, Banten
Eastern Java: Central Java, DIY, East Java
Western Kalimantan: West Kalimantan, Central Kalimantan
Eastern Kalimantan: South Kalimantan, East Kalimantan
Northern Sulawesi: North Sulawesi, Gorontalo, South East Sulawesi
South Sulawesi: South Sulawesi, West Sulawesi, SulTra
Bali
Nusa Tenggara: West Nusa Tenggara, East Nusa Tenggara
Maluku: Maluku, North Maluku
Papua: West Papua, Papua
PALM OIL PRODUCTION AND EXPORT
OF EDIBLE OIL (S1, 2005=100)
Palm oil output
Export of edible oil
Palm Oil (Baseline)
Palm Oil (Scenario 1)
Basline
S1
2029
2027
2025
2023
2021
2019
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
2009
2007
2005
0
2017
200
2015
400
2013
600
2011
800
2009
1000
2007
1800
1600
1400
1200
1000
800
600
400
200
0
2005
1200
GDP, CONSUMPTION, AND GNE
(% DEVIATION FROM BASELINE)
0.3
0.2
0.1
-0.1
Note: GDP = C + I + G + X – M
GNE = C + I + G
-0.2
-0.3
GDP (S1)
CONS (S1)
GNE (S1)
GDP (S2)
CONS (S2)
GNE (S2)
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
S1
S2
National
Papua
Maluku
NusaTeng
Bali
SthSulawesi
NthSulawesi
EKalimantan
WKalimantan
EastJava
NthWestJava
EastSumatra
WestSumatra
HOUSEHOLD CONSUMPTION BY REGION IN
2030 (% DEVIATION FROM BASELINE)
20
15
10
5
0
-5
NAD
SumUt
SumBar
RiauProv
KepRi
Jambi
SumSel
BaBel
Bengkulu
Lampung
DKI
JaBar
Banten
JaTeng
DIY
JaTim
KalBar
KalTeng
KalSel
KalTim
SulUt
Gorontalo
SulTeng
SulaSel
SulBar
SulTra
Bali
NTB
NTT
Maluku
MalUt
PapuaBar
PapuaProv
HOUSEHOLD CONSUMPTION BY PROVINCES
IN 2030 (% DEVIATION FROM BASELINE)
20
15
10
5
0
-5
S1
S2
HIGHLIGHTS
•
Impact on Indonesian GDP is negative but small
•
International transfers does not offset the impact on national GDP
•
Yet, international transfers (nationally) still make Indonesian on average better-off if
consumption or national expenditure is a measure of welfare. This is the nature of
international financing.
•
The effect varies widely across regions
•
•
Sumatera, and Western Kalimantan (West Kalimantan & Central Kalimantan) are
the most heavily affected with moratorium without transfers.
•
Western Kalimantan benefit the most from international transfers.
•
International transfers does not offset the loss welfare of Sumatera.
Policy implication: Should there be any mechanism of equalization of the benefit of
international transfers, if something like this happen?
ALL MODELS ARE WRONG!
But some models are useful.
William Deming
THANK YOU!
www.ceds.fe.unpad.ac.id