Representing Socio-Economic Uncertainty in Human System Models

Jennifer Morris, John Reilly, Sergey Paltsev, Andrei Sokolov, Kenneth Cox

DOI: https://doi.org/10.1029/2021EF002239

Abstract:

Socio-economic development pathways and their implications for the environment are highly uncertain, and energy transitions will involve complex interactions among sectors. Here, traditional Monte Carlo analysis is paired with scenario discovery techniques to provide a richer portrait of these complexities. Modeled uncertain input variables include costs of advanced energy technologies, energy efficiency trends, fossil fuel resource availability, elasticities of substitution for labor, capital, and energy across economic sectors, population growth, and labor and capital productivity. The sampled values are simulated through a multi-sector, multi-region, recursively dynamic model of the world economy to explore a range of possible future outcomes. We find that many patterns of energy and technology development are possible for various long-term environmental pathways and that sectoral output for most sectors is little affected through 2050 by the long-term temperature target, but with tight constraints on emissions, emission intensities must fall much more rapidly. Scenario discovery techniques are applied to the large uncertainty ensembles to explore if there are prevailing storylines behind outcomes of interest. An illustrative investigation focused on different levels of economic growth shows many combinations of pathways and no single storyline emerging for a given economic outcome. This method can be extended to other outcomes of interest, exploring the nature of scenarios with both tail and median outcomes. Sampling from a Monte Carlo generated ensemble provides a rich set of scenarios to investigate, and potentially aids in avoiding heuristic biases in less structured scenario approaches.

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