The model will determine its own growth rate over time. Most dynamic economic models will feed in the average growth rate as a user-defined input. We allow the modelled economy to grow as fast as is possible under the policy options that are in place. User-defined policies may well affect growth rates, albeit indirectly, and these allow us to capture some of the more subtle long-term effects of policy options (such as the rebound effect described earlier).

The model's central 'growth loop' represents the key influences described by the model that lead to physical growth in an industrialised economy. All variables here are referred to in embodied energy terms. An 'industry' sector is defined as containing all those activities that produce physical goods. Other sectors are also defined, such as agriculture, services, housing, etc. These all contribute meaningfully to the economy, and all require a stock of fixed capital (buildings, machinery, etc.) through which to do so. Only the industrial sector is able to supply that capital - either the domestic industrial sector, or one overseas, at any rate. International trade complicates the picture a little, but can be adequately handled by the 'growth loop' model.

As shown in Figure 3A1, the aggregated flow of 'human-made capital' (HMC) from the industrial sector can be diverted to a number of purposes:

• consumption of non-fixed/disposable products
• reinvestment in and maintenance of the capital stocks of industry
• reinvestment in and maintenance of the capital stocks of other sectors
• exports of goods to other economies.

Human - made capital (HMC) produced by firms in the industrial sector flows to the other sectors of the Irish economy and is also exported.

Note that all capital stocks depreciate (an inevitable consequence of the second law of thermodynamics, and a practical fact), and maintaining a sector at a given size requires continual investment. The overall demands for reinvestment by all other sectors will be determined by the assumptions we make about them, and by policy options that we may set. For example:

• required investment in energy will be driven by market forces in most western economies. Ultimately, this will depend upon a diverse range of factors, such as energy costs of extracting the fuels, comparative energy costs of alternative fuels, and demands for the fuel by the domestic economy and export market. All of these factors can be represented in the model.
• required investment in housing will be driven by population in a very simple model, and possibly by a measure of affluence. In a more complex model, we may also wish to introduce average size of a household in capita terms. Many western economies have seen considerable decreases in average household size over the last few decades, with considerable consequences on per-capita consumption of energy and resources of a domestic nature (a six-person household does not generally own a house six times the size of a one-person household, nor a fridge or heating system consuming six times the energy). If we choose to consider the social dynamics of increasing divorce rates and decreasing family sizes, we can see implications for our physical growth loop.

We calibrate the rate of consumption of disposable goods based on short-term indicators of economic well-being, and, after factoring in balance of payment adjustments, allocate the remainder to industrial reinvestment. If this amount exceeds the rate of depreciation in industry, our industrial sector will grow over time, and hence the future production of human-made capital will increase, all other things being equal (and we can break that assumption and model effects of technological change within industry if we wish to). Conversely, if the reinvestment in industry is too small, future output of HMC will contract, to the detriment of the entire economy. Because this reinvestment term is sensitive to changes in consumption, in investment in every sector and to international trade in goods, services and financial flows, the growth of the model as a whole is sensitive to a wide range of policy options.

Figure 3A2 portrays the growth loop in terms of influences between terms, with the arrows pointed from influencer to influenced.

Feedback from the various sectors of the economy and from international trade influences the way that human-made capital (HMC) is allocated.

A plus sign indicates that the variables will move in the same direction (as x goes up, it will push y up, as x goes down, it will push y down), and a minus sign opposite directions.

Finally, it is worth elaborating a little on the balance of payments sector. In a national economy, there will be significant trades with the outside world, in physical goods, in services, and in financial flows. The physical flows can easily be incorporated into the above model, and in some cases (notably energy resources) will already be calculated by the model. In the case of intangible trades, we convert these to a nominal embodied energy value based upon the average energy intensity of the economy, a term that we calculate for internal accounting purposes anyway. An economy that exports significant intangibles (e.g. Switzerland) can, as a result, afford a much greater inflow of HMC than would otherwise be possible. The internal costs of generating such flows can be accounted for in our representation of the services sector, which would probably be quite detailed for such an economy.

THE IRISH MODEL

The pilot model of the Republic of Ireland was developed over a period of approximately six months. We aimed to replicate the broad growth patterns of the Irish economy over the period 1990-2002 (or as recently as official time-series have allowed), and then simulate them out to 2050. This was successfully achieved, although inevitably some areas were sketched-in in relatively little detail. In describing the model, it is useful to note omissions as well as the detail that has been included, particularly for the sake of pointing to relationships between policies that we may have failed to capture in this first iteration of the model.

The model divides the economy into a number of broad sectors, following the sectoral divisions provided by the main data sources that we used to calibrate it. These are:

• Agriculture, Forestry & Fishing
  This sector was sketched-in in terms of fixed capital stocks, and energy resource use. Future growth is driven by domestic requirements and export markets. No attempt was made to distinguish between types of agriculture, nor to assess land use. This latter would be required were we to factor in the land-use requirements of a large-scale biomass initiative (and, to a lesser extent, land-based wind generators, although it can be argued that these can happily coexist with many types of crops).
• Mining, including gas and peat extraction
  Our primary focus here was on describing the reserves of natural gas and peat, and the fixed capital stocks employed to extract them. Investment in these sectors was driven by domestic demand and world export markets (significant only in the case of gas).
• Industry & Manufacturing
  This sector was treated as a single entity, although in reality it covers a range of activities from heavy industry to food processing and the construction industry. (Even in much larger, more mature ECCO models we rarely disaggregate this sector.) The effects of investment in fuel-efficient technologies in this sector were characterised.
• Utilities, primarily electricity generation Electricity generation was divided into a number of technologies, covering conventional fossil- fired plant, combined-cycle plant (a more modern technology with greater efficiency of use of fuel), conventional hydro-electricity, and renewables. Separate subsectors were drawn up to characterise wind generation, photovoltaics, biomass-generated ethanol and methanol plant, and wave energy, although our analyses here focussed primarily on wind power. Userdefined policies for future uptake between existing technologies were developed, with Business-As-Usual policy allocating 90% of new plant built beyond 2000 to combined-cycle fossil plant, and 10% to renewables. The differences between technologies were characterised primarily as:
  1. Load Factor i.e. percentage of time a plant would typically be online
  2. Thermal efficiency of converting fuel to electricity (where the plant is fuel-powered)
• Fixed capital cost of building and maintaining plant
  We did not account for one potential benefit of wind power, that the technology could be developed indigenously, and potentially sold worldwide, whereas fossil-fired futures would be dependent upon foreign technology bases (and therefore represent a poorer situation for international balance of payments).
• Services
  The services sector was characterised in terms of fixed capital and physical resource consumption (e.g. thermal fuels, electricity). Demand for services was limited to the three major consumer sectors, industry, domestic dwellings, and the services sector itself.
• Domestic dwellings
  These again were characterised in terms of fixed capital and resource requirements. Effects of domestic energy efficiency technologies were taken into account (and here the payback could be significantly greater than in the industrial sector, owing to the poor starting position of the Irish housing stock in terms of simple energy efficiency 'quick wins' such as insulation), as well as potential for electricity-powered ground source heat pump technologies.
• Transport
  The transport sector does not maintain its own capital stock, as national accounts data describes the fixed capital in transport machinery as belonging to the owning sector e.g. industry, services, domestic. Energy use by transport is defined separately, though, and we were able to calculate demand based on passenger and freight volumes. Policies describing potential future modal splits between transport sectors are in place, as well as future fuel mixes, including electrically-powered passenger vehicles utilising fuel cell technologies.
• International Finance
  This sector defines the net impact upon the growth of the economy of international trade. Some parts of this can be characterised well by the model, such as the necessity of fuel imports, others are defined as user policies, such as future levels of international investment capital. Over the calibration period, Ireland enjoyed an unusually high influx of international capital, which we have allowed to decrease somewhat in the Business-As-Usual profile for the model.

DEFINITION OF SUSTAINABILITY

Sustainability is an ill-defined and much-abused term. For the purposes of assessing the relative merits of the outcomes generated by our scenarios, it is useful to have one or more sustainability indicators to hand. For this study, we focus primarily on energy-based measures, because we are looking at energy-related scenarios.

Carbon-dioxide emissions are a good sustainability indicator, and can be readily compared against the agreed Kyoto targets for the Irish Republic. If we define energy sustainability as receiving all energy requirements from renewable resources, we can compare our progress towards that goal by plotting fractions of energy derived from renewables, both for electrical energy and all primary energy. We also created a third variant for this study, in which we included indirect imports of primary energy in an attempt to reflect the energy expended elsewhere in the world. This would counter the 'accounting loophole' of the simpler indicator whereby an economy could simply shift energy- intensive activities overseas. In the case of the Irish model, it made only a slight difference in most cases.

In terms of security of energy supply, we could compare Irish demand for exported oil and gas against projected world outputs of oil and gas (using data from Campbell, 2002). Again, it is worth stressing that our assessment of the sustainability of each outcome does not end with the set of indicators outlined above, and that it is necessary to step back from the model and consider the results in the light of the real world.

CALIBRATING THE MODEL

The model was initialised for the year 1990, and run over a ten-year period against real historical data in order to calibrate it. The primary data sources used to calibrate the model were:

• National accounts data from the Central Statistics Office of Ireland (www.eirestat.cso.ie), particularly for the purpose of getting Gross Domestic Fixed Capital Formation (GDFCF) data (series naaa04xx) upon which to base the model rates of capital formation. In this case, as no Fixed Capital Stock data was available from the CSO, the GDFCF data was also used to estimate initial capital stocks by using a simple spreadsheet model that tracked growth and depreciation of sectoral capital stocks over the calibration period. The CSO bpaa series data was also used to calibrate the international finance sector of the model.
• Energy balance data for Ireland, from the Department of Public Enterprise. The report "Energy in Ireland" provides data for the period 1980-1993. Energy balances for 1994-2000 were taken from the DPI website (www.irl.gov.ie/tec/energy/statistics ). These provide a detailed breakdown of energy resource production, imports and domestic usage by sector, as well as transformations into secondary fuels such as briquettes and electricity. Combining the energy balances over the calibration period, it was possible to develop detailed time-series data of sectoral energy usage by fuel type.
• The Electricity Supply Board Annual statements contained much detailed information on generating capacities and types of generator, from which a more detailed description of the electricity generation sector could be developed.
• The final report of the EU-funded ALTENER report "Total Renewable Energy Resource in Ireland" provided helpful information when developing the renewable energy sector.

This calibration process led to the definition of a business-as-usual (hereafter BAU) scenario, in which current technologies and policies were extrapolated out over a further fifty-year period. This is not intended to provide for an accurate forecast of Ireland's future, but to develop a well-defined baseline against which we can compare the effects of the changes we introduce in our policy studies. In the electricity-generating sector, we assumed that the majority of new generating capacity would be gas-fired, with a small fraction (10%) being wind energy. We assumed a continued high level of investment in Ireland from overseas, although less than was seen in the 1990s, recognising this to be an unusual decade. Key assumptions of the business-as-usual scenario defined for the purposes of this report are outlined in Figure 3A3.

Key features of the outcome of the Business- Scenario Policy Inputs / Scenario Definition As-Usual scenario are outlined below:

• The economy continues to grow, but very slowly (figure 3A4).
  
  

  Growth Indicators under BAU scenario. Growth in both personal material affluence and manufacturing capacity is slow

  Our key indices of growth, for average per capita material affluence and manufacturing output, show less than a 50% increase over the 50 year period, equating to an average growth rate of less than 1%. This slow growth is in spite of the continued inward investment from overseas, and partly reflects the longer-term effect of this, as returns on the investment begin to leave the country.

• Carbon dioxide emissions show a decrease from through to 2030 (figure 3A5), owing to a combination of structural changes and economic decline.
  
  

  Projected CO2 emissions under Business as Usual. The temporary decline in emission rates (which does not mean a decrease in atmospheric CO2 levels) can be explained by looking at the changing structure of the electricity generating sector. Note that the model underestimates CO2 emissions for 2000 by roughly 5%, as the actual figure was around 41 million tonnes carbon/year.

  Beyond 2030 they remain essentially flat, in step with the negligible economic growth rates during the latter phases of simulation. The decrease from 2000-2030 can be explained by the phasing out of the current cohort of conventional fossil-fired electricity plant, and its replacement by more efficient combined cycle plant (figure 3A6).
  
  

  Make-up of electricity sector generating capacity under Business as Usual. Existing thermal capacity declines through to 2030, and the majority of new capacity is introduced as combined-cycle plant. Renewables play a minor but not inconsiderable role.

  This in itself is enough to meet the Kyoto requirements for 2012, with no positive action required. In terms of energy policy, it is apparent that there is a window of opportunity over the next thirty years within which alternative energy strategies can be developed while enjoying the benefits of the decline of this technology. Beyond 2030, achieving an active reduction in CO2 emissions would not be so easy, particularly if other policies were brought into play during the next fifty years that resulted in positive economic growth. The lukewarm 'good news' of matching the Kyoto targets shown here would be better characterised as a combination of opportunism and economic doldrums, and shouldn't be mistaken for actively getting to grips with the required decoupling between economic activity and fossil fuel use. (It is also worth pointing out that a flat CO2 profile is not particularly good news for the environment, as it simply represents a steadily increasing stock of CO2 in the atmosphere rather than a rapidly increasing one.)
• Dependency on imported fuels remains very high. Native supplies of natural gas are already mostly exhausted apart from the recently discovered Corrib field off the coast of County Mayo. We decided to treat this field as a nonnative resource as its owner, Shell, will find the capital for its exploitation outside Ireland and send almost all the money it receives for the gas outside Ireland too. As this makes gas from Corrib functionally identical to gas coming into Ireland across the interconnector, it allows it to be left out of the model. Ireland's only other indigenous fuel, peat is a small fraction of the total energy demand. Major fuel demands include natural gas for electricity (21% of total fuel demand by 2050), oil fuels for the transport sector (42% of total fuel demand by 2050) and domestic heating fuel (18% of total fuel demand by 2050). In terms of fuel supply security, the combination of declining native gas supplies and buying into a gas-dependent electricity future do not make for a good combination.

SIMULATION EXPERIMENTS

A number of simulation experiments were conducted to assess the viability of some proposed solutions to Ireland's (and the Western world in general's) current sustainability problems of reliance of depletable resources and increasing carbon dioxide output. The options assessed here are primarily technological. Figure 3A7 contains a brief summary of the changes to the BAU profile made in defining all the scenarios undertaken in this report.

Make-up of electricity generating capacity under first renewables scenario: renewables rapidly ovetake CC technologies to become the dominant technology.

Under the second renewables scenario, the situation is similar to Figure 3A8, only somewhat more rapid.

RENEWABLE ELECTRICITY

Ireland has significant potential for renewable electricity generation, primarily in the form of wind and wave. Bio-fuels are also an option, although not one that we examined in detail here, as doing so would require a more detailed model of land-use interactions between fuel crops and other forms of agriculture than we have currently developed. Compared to gasfired combined cycle plant, wind power is roughly 3 times more expensive to build (the capital costs per megawatt of generating capacity are not widely divergent, but the load factor for CCGT is much higher, leading to a far greater return in terms of electricity generated). Potentially, a large-scale adoption of wind power would have a negative impact on economic growth as a result of this extra capital expenditure (in the BAU scenario, investment in the electricity sector accounted for roughly 5% of total investment in fixed capital stocks). Although the economy can support the more extreme penetration of wind power, overall, this has a relatively minor impact on the sustainability of the nation. As we pointed out earlier, there are major direct demands for fossil fuels outside of the electricity sector. Figure 3A10 plots the rather smaller share that renewable electricity gains of the economy's total energy usage.

Fractions of electricity generated by renewable resources under the three scenarios

Fractions of electricity generated by renewable resources under the three scenarios

The 9-10% share achieved by the second renewables scenario is certainly an improvement on current arrangements, but is unlikely to make a long-term difference environmentally (the CO2 profile for this scenario is only 5% lower than for the BAU scenario by 2050). If renewables-generated electricity is to have a serious impact, it must also begin to replace some of these other demands. The remaining scenarios look at some options for doing this.

RENEWABLES-POWERED TRANSPORT

Fuel cells represent one technology that may be used in the transportation sector as an alternative to continued fossil fuel dependency. We made a broad assumption that an electricitypowered car could convert energy to motive power with roughly twice the efficiency of a petrol engine. The conversion of fuel to electricity (the thermal efficiency) for conventional electricity generators is roughly 30-35%, with combined cycle plant achieving a somewhat higher value. Hence, from a system-wide perspective, the use of fossil-fired electricity to power transport makes little sense.

In the case of renewable electricity, of course, there is no initial fossil fuel input, and a clear case for sustainable transport through use of fuel cells can be made. We adopted the more extreme renewable energy policy at the same time as driving a significant substitution of conventional road transport with electrical vehicles, achieving 50% penetration by 2030 and a 75% penetration by 2040. This has a significant effect on the demand for thermal fuels by transport, as shown in Figure 3A12, and reduces the total energy demand of the economy by around 7% by 2050 when applied by itself, and has a marginally positive effect on the fraction of renewable energy use indicator (Figure 3A13).

Fossil fuel demand by transport under Business as Usual and fuel cell scenarios

Fractions of energy supplied by renewable resources under Business as Usual and fuel cell scenarios.

Domestic energy conservation

Ireland's housing stock generates a significant thermal energy demand, used almost entirely for space heating. The current housing stock can be characterised as poorly insulated, with even modern dwellings tending to opt only for simple cavity insulation. A number of quick wins could be made by insulating this housing stock. We characterise the impact of investment in domestic energy efficiency as one of diminishing returns, assuming that the first investments made are the most cost-effective. The data we use is based on a study by the TNO, Netherlands (Melman et al., 1990), and probably under-represents the capacity of the Irish housing stock to benefit from such investments. Nonetheless, with sufficient investment, energy savings of up to 50% would be feasible, although this would require significant additional investment.

Under the domestic energy scenario, we invest additional resources in the housing stock with the express purpose of applying energy conservation technologies, matching the main investment in the domestic sector by 5% in 2010 through to 20% by 2030 onwards. The knock-on effect of this is to reduce energy consumption per household by 20% by 2050, as these investments trickle through the existing and new housing stocks (Figure 3A14). Overall effects on the fossil fuel dependency of the economy are very marginal (Figure 3A15).

Energy savings arising from domestic energy efficiency investment

Domestic energy efficiency policy has a minor impact on the fraction of national energy demand met by renewables.

Industrial energy conservation

Industry and manufacturing is also a large consumer of fossil fuels. Here, the fuels are used to provide a mixture of heating and motive power, as well as cogeneration of electricity. Following the TNO study data, we assume that the returns on energy efficiency investment in manufacturing would be less than with the housing sector, with a maximum reduction of around 10% being achievable. These figures are, again, probably rather cautious, but we present them here in the absence of any other hard data.

The scenario here was defined in an identical fashion to the domestic energy efficiency case, with a ramping up of additional investment to match 20% of the primary investment in the sector by 2030. Figure 3A14 shows that the reduction per unit of operational stock is much less than for the domestic sector, and Figure 3A15 confirms that the impact on the national renewables balance is negligible.

Domestic heat pump technologies

An alternative (or complement) to domestic energy efficiency is the use of electrical heating for homes. This makes very little sense when electricity is generated by fossil fuels (up to two thirds of the heat content of the fuels goes up the generator chimney and one third is delivered to the home), but under a predominately renewable energy regime it might make more sense. Rather than looking at systems that convert electrical energy directly into heat, however, we chose to examine heat pump technologies, in which the heat energy generated is extracted from ambient heat gradients in the ground, and the electricity is simply used to access this rather than being the primary source of the heat.

In characterising the technology, we assumed an average thermal efficiency of traditional domestic heating of 80%, and a coefficient of performance of the heat pumps of 25% (i.e. 4 units of electricity, measured in heat energy terms, are required to transfer one unit of heat energy). The example scenario pushes the technology quite aggressively, aiming at 10% penetration of the housing stock by 2010, through to a 50% penetration by 2050. Predictably, this roughly halves the domestic sector intake of fossil fuels (Figure 3A16), and increases electricity demand by dwellings significantly (but not by 50%, as a large fraction of this is required to power consumer goods of various sorts as well) - (Figure 3A17).

Thermal energy demand by dwellings under Business as Usual and domestic heat pump scenarios.

Electrical energy demand by dwellings under Business as Usual and domestic heat pump scenarios.

Again, we see a mild improvement in the national renewable energy balance (Figure 3A18), and this leads to an increase in total renewable electricity generating capacity of 10%.

Fraction of national energy demand met by renewables under Back At Work and domestic heat pump scenarios.

All of the above

Finally, we adopted all of the above measures at once.

• A large-scale substitution of renewable electricity technologies (wind-powered), with 80% of all new generating capacity being wind.
• Large-scale transition towards electric fuel-cell road transport
• Significant investment in domestic and industrial energy conservation
• Widespread adoption of heat pump technologies for domestic heating

As outlined in Figure 3A8, we introduced these both at the magnitudes already examined oneby- one, and then finally at a greater rate, simply in order to see how far we could achieve sustainability by the measures we had focussed upon.

Sum effect of sustainability policies on growth

Sum effect of sustainability policies on CO2 emissions

Fraction of total energy demand met by renewables under combined sustainability scenario

CONCLUSIONS

The Republic of Ireland is capable of making a transition towards sustainability over the next fifty years, owing to a plentiful supply of renewable resources and modest growth prospects. Structural factors such as the decline of current 'dirty' generating technologies, and the quick wins available from a poorly insulated housing stock, also serve to play a part.

While renewable electricity generation can play a major part in this transition, a simple approach aimed only at replacing current fossil-fuel generation of electricity with renewables will have a limited effect. A much greater effect can be had by looking for synergies with other parts of the economy, where electricity-based technologies that would simply be inefficient (in system-wide energy terms) can be brought into play. The more high-tech options considered here, such as car fuel cells and heat transfer pumps, are wasteful of fossil fuel if fed on fossil-generated electricity alone, but can become very useful in widening the circle of influence of a renewable electricity technology. The renewable electricity industry would do well to seek partnerships with developers of such technologies, in our opinion.

The technologies that we have looked at in this study are by no means exhaustive, and a more thorough cataloguing could doubtless achieve even greater gains towards sustainability than we managed in our final scenario. There are other renewable energy technologies, such as wave power, solar-power systems (perhaps less of an opportunity in the Irish climate, but still offering some potential) and biofuels, which can be represented by the ECCO methodology (and have been in other studies). There are many other technologies that may substitute fossil fuel consumption for electricity use, developing further synergies with an expanding renewables sector.

As with any modelling study, we have presented a greatly simplified picture of a real economy, and left out much detail. In balance of payments terms, the economy may benefit from technical leadership in renewable technologies, which it is far more likely to develop through early adoption than in the already-saturated market for combined cycle turbines. We have not examined in detail the land-use implications of our policies, what the spread of wind generators across the landscape would look like (and, were we to consider biofuels, this would be an even more important aspect to factor in). We have not discussed nuclear power as an option here, although the model is capable of representing the shorter-term costs and benefits of that technology at least.

This is one of almost 50 chapters and articles in the 336-page large format book, Before the Wells Run Dry. Copies of the book are available for £9.95 from Green Books.

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