Trade - GCAM

Note: The documentation of GCAM is 'under review' and is not yet 'published'!

Model Documentation - GCAM
Model scope and methods - GCAM Model concept, solver and details - GCAM Temporal dimension - GCAM Spatial dimension - GCAM Policy - GCAM Socio-economic drivers - GCAM Population - GCAM Economic activity - GCAM Macro-economy - GCAM Trade - GCAM Energy - GCAM Energy resource endowments - GCAM Fossil energy resources - GCAM Uranium and other fissile resources - GCAM Bioenergy - GCAM Non-biomass renewables - GCAM Energy conversion - GCAM Electricity - GCAM Heat - GCAM Gaseous fuels - GCAM Liquid fuels - GCAM Solid fuels - GCAM Grid, pipelines and other infrastructure - GCAM Energy end-use - GCAM Transport - GCAM Residential and commercial sectors - GCAM Industrial sector - GCAM Other end-use - GCAM Energy demand - GCAM Technological change in energy - GCAM Land-use - GCAM Agriculture - GCAM Forestry - GCAM Land-use change - GCAM Bioenergy land-use - GCAM Agricultural demand - GCAM Technological change in land-use - GCAM Emissions - GCAM GHGs - GCAM Pollutants and non-GHG forcing agents - GCAM Carbon dioxide removal (CDR) options - GCAM Climate - GCAM Modelling of climate indicators - GCAM Non-climate sustainability dimension - GCAM Air pollution and health - GCAM Water - GCAM Appendices - GCAM Mathematical model description - GCAM Data - GCAM References - GCAM
Corresponding documentation
AIM-Hub BLUES C3IAM COFFEE-TEA DNE21+ GCAM GEM-E3 GRACE IMACLIM MESSAGE-GLOBIOM PROMETHEUS REMIND-MAgPIE TIAM-UCL
Previous versions
No previous version available
Model information
Model link	http://jgcri.github.io/gcam-doc/toc.html https://github.com/JGCRI/gcam-core
Institution	Pacific Northwest National Laboratory, Joint Global Change Research Institute (PNNL, JGCRI), USA, https://www.pnnl.gov/projects/jgcri.
Solution concept	General equilibrium (closed economy)GCAM solves all energy, water, and land markets simultaneously
Solution method	Recursive dynamic solution method
Anticipation	GCAM is a dynamic recursive model, meaning that decision-makers do not know the future when making a decision today. After it solves each period, the model then uses the resulting state of the world, including the consequences of decisions made in that period - such as resource depletion, capital stock retirements and installations, and changes to the landscape - and then moves to the next time step and performs the same exercise. For long-lived investments, decision-makers may account for future profit streams, but those estimates would be based on current prices. For some parts of the model, economic agents use prior experience to form expectations based on multi-period experiences.

International trade in most commodities in GCAM is done by one of two methods: (1) Heckscher-Ohlin (single global markets), or (2) Armington Style Trade (global trade with regionally-differentiated markets with Armington-like preferences between domestic and imported commodities). Other approaches for trade can also be implemented in the GCAM framework (such as GCAM USA where logit based decisions are made to facilitate trade between the 50-states) See trade details and trade outputs.

Heckscher-Ohlin

The Heckscher-Ohlin theorem explains trade using factor endowments and predicts that each country produces goods with more intensive use of its abundant factor of production (Peter Debaere, 2003; Vanek, 1968). The empirical use of the Heckscher-Ohlin approach assumes products are homogeneous across sources and traded in a single global market (i.e., fully integrated world market). Markets clear at the world level and each region will see the same global price and independently decide how much each will supply and demand of each commodity given that price. A region’s net trade position is dynamic depending on economics, technical change, demand, growth, resources, etc. Under this method for trading goods there is no modeled preference for a given region to demand a commodity from any other specific region.

The trade of agricultural products were mostly modeled using the Heckscher-Ohlin approach in early versions of GCAM (e.g., GCAM v4), and trade of livestock products was fixed in these versions. But GCAM has been updated to the Armington style trade modeling approach for most of the agricultural and livestock products. However, FodderHerb is still modeled using the Heckscher-Ohlin approach and FodderGrass is not traded. Also, major energy commodities such as coal, gas, oil, bio-energy, etc. are also traded in a single world market with the Heckscher-Ohlin approach.

Armington Style Trade

For the agricultural, livestock, and forestry commodities in GCAM (except fodder crops and fish & other meats), we use an Armington style distinction between domestic and imported goods. The Armington approach assumes products are differentiated by source and consumers view goods produced in different countries as imperfect substitutes (Armington, 1969). The theoretical background and the derivation of the logit-based Armington approach are documented in Zhao et al. (2020). In this approach, the competition between imports and domestic is governed by a logit sharing function. Imports are from a single global pool that draws from all regions and is also governed by a logit. The logit-based Armington approach requires a segmented regional markets, as opposed to the integrated world market in the Heckscher-Ohlin approach. Thus, it allows differentiating regional prices and tracing gross trade flows.