SUMMARY Modelling the regional economic impacts of energy development: a survey Mentzas et al. (1987) Mentzas et al. (1987) performed a survey on models of economic impacts of energy developments. Even though their work passed unnoticed in literature, it provides some fundamentals of the energy and economic development relationships “at a regional level (also extrapolatable to country level)”. Energy decentralization is generally included in the context of sustainable development. In this respect regional development plans should be integrated with “accurate and timely economic impact projections of energy development”. In order to understand the role of energy impact on the economy, two type of studies are needed: “Energy-economy interdependencies and Regional impact assessment of resource development, which in the best sense they must be integrated. (Major topics: energy demand and supply balance, production and trade patterns of the system, demographic evolution, price, fiscal and social service systems/institutions)” Energy economic impact studies can be classified according to two criteria: 1) Relationship understanding for overall planning process Studies “ in relation to the use in the overall planning process” and 2) To what extent using modelling techniques in relation to the degree to which studies incorporate modeling procedures.

1st 2nd

Normative (what’s ought to be [if…]) Descriptive/Positive (what it is) Informative (not correct)

qualitative quantitative-empirical incomplete models integrated models

Regio-economic impacts 1st Assumptions: Openness. In finance, labor and population exchange, trading inter-intra-country. The regional system should be treated separately and not as a national sytem. 2nd assumption. The exploitation of energy resources is seen as an “exogenous disturbance” to the economic system. Energy = exogenous disturbance that contributes to transform but doesn't provide structural change. In turn, the affected variables by the disturbance are labor force-materials construction, energy supply patterns/prices, energy demand??, substitution between different energy sources… “This disturbance does not cause any substitution between energy and the other production factors” Economic implications Primary effects refer to the material and labor requirements directly

connected to the advent of the primary energy facility; Direct effects deal with the changes in regional production and

employment occurring as a result of the local procurement of the energy facility;

indirect effects take into account the inter-industry effects generated from the increase in local purchases of the primary and its supplier facilities. these effects might have a static or dynamic nature. In the latter case, they

also consider changes in fixed capital formation, due to changes in the demand of goods.

induced effects refer to the production and labour required in order to meet the demand for goods and services associated to the increased earnings connected with the previous effects. In some studies, price-induced impacts are also included (if prices are explicitly considered).

The combined effects are usually join in the Total Multiplier Effect, which estimates “the effects of a change in spending in one part of the economy, on total economic activity in a region. displacement effects refer to the existence of upper financial limits (e.g. a

displacement effect on employment could take place if an energy choice reduces the labor requirements associated with an alternative energy form);

respending effects take place as energy cost savings are respent; while, substitution effects occur when funds are diverted to energy expenditures.

Exceptions and items not considered. Structural changes are not included in the impacts above Methodological approaches Techniques to evaluate energy impacts are used to satisfy the need of regional structure descriptions, forecasting and policy analysis. Three namely the economic base, the input-output and the econometric models have been widely used for estimating the regional economic impacts of energy development Economic based models Regional economic activity is divided into basic and no-basic sector. The basic sector produces goods for export out of the region and the non-basic one produces goods for local consumption. The objective is to determine the effects on employment, i.e. Energy is a development employment-driven disturbance. The model can be used for stimulating the impacts of energy development when direct employment effects of energy projects are aggregated to the basic sector. The allocation of employment between the two sectors is a problem of the model. Disadvantages are assumptions of ewual productivity of sectors, just the aggregate effect is known, and Dependent entirely on multipliers Regional input and output models These models are based upon a quantitative analysis of the interdependencies between the region’s industries as suppliers of inputs and purcharsers of products. Two ways in which the

impact is evaluated: Disturbance in terms of final demand and New variables for input-output tables are needed (latter… 1st approach-Includes material for energy projects and requirement of intermediate goods… 2nd approach Energy sectors as industrial sectors of the input-output matrix and determines the final demand exogenously)[if used with dynamic i-o model, Not always it has an answer and Very expensive method and requires specific data]. PROBLEM Has led analysts to numerous attempts to approximate the regional inter-industry relationships by adjusting the coefficients already available for larger areas or the country as a whole. Fortunately, it provides an acceptable framework to pass form technic economic data to macroeconomic view Econometric modeling At a regional level, not mature, yet interesting. Advantages such as forecasting capabilities and policy-analytic attributes and they do not employ a large number of assumptions as other models do. Most advantage… Econometrics gives a consistent framework. It implies two main difficulties for the analyst: 1) Scarcity of regional data which may lead to simple model structures 2)not enough information about the linkages of energy and the other sectors/activities. Econometric models is that although they are overall suitable in providing a framework for simulating various regional growth paths, however they are relatively ineffective in assessing the impacts of specific energy projects To every model… Subjective impact dimensions should be included. An integration of various impact dimensions should be inherent in impact assessment (Pop growth vs secundary impacts scope in crucial, Public service, Fiscal impact, Social often not taken into account) CONCLUSIONS 1st directionLinking accounting techniques 2nd Environmental Impact Assessment 3rd Integration , Accurate formulation and the adequate integration of all the impact dimensions 4th Adaptability. The construction of a generalized framework of data needs which will in turn provide sound prescriptions for the establishment of well-defined regional energy and economic data bases MENTZAS, G., CAPROS, P. & SAMOUILIDIS, I. E. 1987. Modelling the regional economic impacts

of energy development: a survey. Socio-Economic Planning Sciences, 21, 151-158.