ENVIMATscen model
At the core of the model is the solution of economic equilibrium
The ENVIMATscen model has been built on the static input-output model ENVIMAT by adding sector accounts’ income formation, distribution and use from Statistics Finland, as well as the input-output price model.
The model solves the balance of the economy-wide circular flows for the selected end year so that the supply and demand of products, investments and saving, and the supply and demand of labour are in balance. The population projection is also taken into account.
The price model determines changes in the relative prices of products when, for example, there are changes in intermediate consumption of products or in labour and capital costs. Prices affect household consumption through price elasticity and, through changes in the external competitiveness of the economy, on the import and export of products.
ENVIMAT model as the basis
The model has the same product group and industry resolution as the static ENVIMAT model. It produces a snapshot of the target year, and the same production- and consumption-based indicators that the static model produces for the base year can be calculated for the target year.
Environmental impact calculations are carried out as in the static ENVIMAT model, allowing for the examination of the life cycle impacts of products' final use. Additionally, the ENVIMATscen model can better account for LULUCF (Land Use, Land-Use Change, and Forestry) emissions than the static model.
The data, scenario assumptions, and results of the ENVIMATscen model are compiled into Excel workbooks, and simulations are run using the R programming language.
Satellite models enhance calculations
In addition to the economic core model, satellite models have been built to describe specific economic sectors and their environmental impacts in more detail (e.g., energy consumption, electricity and heat production, mining and quarrying, pulp and paper industry). Satellite models are often calculated in physical mass or energy units and are linked to the core model's input coefficient matrix.
The ENVIMATscen model is demand-driven, meaning that demand determines how much production activity is needed. However, satellite models can also be supply-driven. For example, the assumed operating mines and their extraction volumes in Finland for the target year can be set exogenously, i.e., outside the model solution. In this case, the import or export of products balances the demand and supply.
Strengths and limitations of the model
The ENVIMATscen model overcomes certain weaknesses of static input-output modelling (when used in scenario analyses). The model takes into account population projections, supply-side constraints, the need for economic investments and their financing, and the disposable income of different sectors. Various rebound effects are also taken into account.
In the ENVIMATscen model, household consumption is influenced by price elasticities and propensities to consume. In addition, there are price elasticities in foreign trade. Overall, the behavioural assumptions of economic agents in the model are simpler compared to general equilibrium models. Therefore, the model is not well-suited for assessing the impacts of policy instruments.
On the other hand, the structure of the model allows fairly drastic changes to be introduced exogenously into the model. In addition to economic impacts, many different environmental impacts can be examined in the same model framework. The model's structure is flexible, and new satellite models can be added as needed.
Model usage
The model applies the principle of steady growth, i.e. it does not include short-term cyclical fluctuations. It is also not a forecasting model by nature. Instead, the model can be used to produce internally consistent alternative development paths and to assess the overall economic and environmental impacts of various measures, such as technological changes and consumer choices. The impact assessment of measures is usually carried out in relation to the chosen reference scenario or baseline.
The model is a useful tool for long-term analyses, focusing on the comprehensive assessment of the impacts of alternative measures on the economy, employment, and the environment.