internal vs external region - Printable Version

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internal vs external region - Erik - 25-10-2012


I am wondering a bit about the difference of choosing an internal or an external region for import of energy commodities, eg oil and coal. As I see it, there is no modeling/calculation difference between these two options. The main difference is maybe convenience (you need less definition of an external region and you can separate regions of analysis from endogenous inputs)?


internal vs external region - Antti-L - 28-10-2012

I am not sure I fully understand your question. Maybe you could provide a more concrete real-world example where you describe the two alternative modeling options you are considering?

Anyway, using external region(s) for modeling the imports of energy commodities is usually the most transparent and recommended way in geographically limited models that do not cover the whole world markets (supply and demand) of those commodities, because in that case the supply / demand equilibrium usually cannot be modeled. Of course, you could also introduce into the model an artificial internal region (e.g. "Global"), which supplies the commodities to the "real" model regions via endogenous trade. Such an artificial region might be viewed as representing the "world market" for the traded commodities. In this case you could again model the supply of the commodities either using imports from some external region to the artificial internal region, or by introducing extraction and refining processes into the artificial region. You might then even include the demand of the rest of the world using exogenous projections.

I agree with you that subjective convenience plays a major role in choosing between various modeling options...

internal vs external region - Erik - 08-11-2012

Thank you Antti, you have answered the question :-)