The model is based on a bottom-up approach where the supply side of the model is built-up from the bottom (land cover, land use, management systems) to the top (production/markets). The agricultural and forest productivity is modelled at the level of gridcells of 5 x 5 to 30 x 30 minutes of arc, using biophysical models, while the demand and international trade occur at regional level (30 to 53 regions covering the world, depending on the model version and research question). Besides primary products, the model has several final products and by-products, for which the processing activities are defined.
The model computes market equilibrium for agricultural and forest products by allocating land use among production activities to maximise the sum of producer and consumer surplus, subject to resource, technological and policy constraints. The level of production in a given area is determined by the agricultural or forestry productivity in that area (dependent on suitability and management), by market prices (reflecting the level of demand), and by the conditions and cost associated to conversion of the land, to expansion of the production and, when relevant, to international market access. Trade is modelled following the spatial equilibrium approach, which means that the trade flows are balanced out between different specific geographical regions. Trade is furthermore based purely on cost competitiveness as goods are assumed to be homogenous. This allows tracing of bilateral trade flows between individual regions.
Woody biomass demand and forest industry technologies
The forest sector is modelled to have seven final products (chemical pulp, mechanical pulp, sawn wood, plywood, fibreboard, other industrial roundwood, and household fuelwood). Demand for the various final products is modelled using regional level constant elasticity demand functions. Forest industrial products (chemical pulp, mechanical pulp, sawn wood, plywood and fibreboard) are produced by Leontief production technologies, with input-output coefficients based on the engineering literature. By-products of these technologies (bark, black liquor, sawdust, and woodchips) can be used for energy production or as raw material for pulp and fibreboard. Production capacities for the base year 2000 of forest industry final products are based on production quantities from FAOSTAT. After the base year the capacities evolve according to investment dynamics, which depend on depreciation rate and investment costs. This implies that further investments can be done to increase production capacities or allow industries to reduce their production capacities or be closed.