OR Presentation ON GOAL AND INTEGER PROGRAMMING

HELPFUL IN RESEARCH

1. Studying the impact of R&D expenditures on sustainability-related criteria: The case of Kazakhstan

2. Introduction

3. Purpose of the research paper Most countries face important economic, social and environmental challenges that must be overcome in order for long term growth to be possible. They must be strongly committed to invest in R&D activities in order to do that. This paper aims to extend the previous research on macro-economic growth models.

4. Methodology The model considers four different criteria and six economic sectors and aims at finding the optimal allocation of labor across different sectors. The model also endogenously determines the amount of investments in pollution abatement activities together with energy-related R&D efforts. The paper presents an application to the case of Kazakhstan, an emerging Asian country, that aims to become one of the top 30 most developed countries in the world by 2050. 4

5. Findings The model shows the limits of the Kazakh agenda that identified too ambitious goals as the country has to go through a big transition that involves a range of modifications in institutional structures. There are various barriers like lack of awareness and knowledge and lack of capability that was stopping this so far. Kazakhstan should invest more in R&D activities able to develop sustainable energy sources to face the current electricity consumption demand and to reduce the greenhouse gas emission in the future. 5

6. Overview of Kazakhstan Kazakhstan was a part of the USSR and recently gained independence in 1991, as of such it was not very stable economically. Kazakh and Russian are two widely spoken languages. The main source of income is oil, gas and minerals. Kazakhstan’s initial growth was supported by elevated oil prices, so when the oil prices dropped around 2014-15 Kazakhstan made the decision to diversity their economy. Kazakh aims to be in the top 30 most developed countries by 2050, to achieve this goal they have been transitioning towards a free market economy. Kazakhstan’s current GDP is 225.5 billion USD. 6

7. Sustainable Development Goals In 2015, UN adopted a set of goals to work on in 17 different areas (like better health, climate action, clean energy, etc.) to achieve prosperity and address global challenges. In order to implement means to achieve these goals, decision makers need to develop various contrasting goals to find the best balance. Economic growth and environmental sustainability are two inversely proportional things as economic growth often involves exploitation of the environment. Decision makers need to balance the two such that the scale does not tip in the favor of one or the other. 7

8. Triple bottom line (TBL) Triple Bottom Line is a framework that is used to assess performance on three factors, economic, social and environmental. Economic dimension focuses on financial bottom line, factors like GDP and income distribution are considered. Social dimension focuses on thing such as quality of life, healthcare, education, culture etc. Environmental dimension focuses on things such as natural resource management, climate change, biodiversity etc. 8

9. Why did Kazakhstan need to change? Kazakhstan relies on extractive industries, primarily oil, which is not sustainable as those resources will eventually exhaust. They were also causing a lot of pollution due to outdates soviet equipment which is not good. The government aimed to transition to a more sustainable green economy and reduce green house gas emissions, improve agriculture and waste management, and transition to renewable energy. The goal was to increase per capita GDP and develop a strong middle class. 9

10. Actions planned/taken by Kazakhstan Kazakhstan plans on becoming one of the top 30 most developed countries by 2050. Kazakhstan aims to transition to a green economy with a focus on sustainable energy and diverse economic development. The country is focusing on increasing the contribution of renewable sources in the energy mix. The country will allocate 3% of it’s GDP to research and development for a smooth transition that does not bothers it’s citizens by ensuring steady employment and for further innovation in related fields. 10

11. Model Formulation

12. Formulation Four criteria, F1, F2, F3 and F4 F1 is the aggregate production function of the economy in USD. F2 is the greenhouse gas emissions in terms of CO2 emissions in Gg. F3 is amount of electricity consumed in terms of tons of oil. F4 represents amount of employed workers in thousands. Supposing there are n economic sectors Xj is the amount of workers employed in Jth sector. Aij is the per capita contribution of Jth sector towards ith objective. i goes from 1-4, j goes from 1-n 12

13. Delta 2 and Delta 3 are the parts of GDP going towards pollution abatement and energy conservation respectively. As assumption is taken that there is no difference between skilled and unskilled labour and there is zero unemployment. C is the average level of per capita consumption. 13

14. 1. These set of constraints measure the distance between achievement level of each criterion. 2. The inequality on the top right states an upper bound for the total level of consumption. The total level of consumption is calculated by multiplying the total population for the average level of consumption. 3. The constraints on the right balance the willingness to preserve the total labor force in each economic sector and describe some sign constraints. Below it is the objective function 14

15. Policy Implication 15

16. Renewable energy goals In 2013 Kazakhstan adopted the National Concept for Transition to a Green Economy by the year 2050. It aimed to drive the country towards green energy. The goal was to increase renewable energy in total energy pool to 3% by 2020, 30% by 2030 and 50% by 2050 There are various barriers to transitioning towards renewable energy, lack of experience, lack of expertise and a lack of capacity to name some.

17. Economic Goals The paper presents a methodological approach to the formulation of an effective and sustainable policy aimed at supporting the development of Kazakhstan. The initial goal for 2050 is not feasible but a more realistic goal is proposed. The model also highlights the need to invest in renewable energy to reduce green house emissions in the future and the importance of R&D with sustainability objectives. 17

18. 18

19. Table 1 is the goal set for 2050, Table 2 is a more feasible goal suggested by the paper 19