Modeling endogenous technological change for climate policy analysis

The approach used to model technological change in a climate policy model is a critical determinant of its results in terms of the time path of CO 2 prices and costs required to achieve various emission reduction goals. We provide an overview of the different approaches used in the literature, with...

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Bibliographic Details
Published in:Energy economics 2008-11, Vol.30 (6), p.2734-2753
Main Authors: Gillingham, Kenneth, Newell, Richard G., Pizer, William A.
Format: Article
Language:English
Subjects:
Accounting
Climate change
Cost analysis
Emissions control
Energy economics
Environmental policy
Exogenous
Exogenous Technology R&D Learning Induced
Induced
Learning
Modelling
Policy analysis
R&D
Research & development
Studies
Technological change
Technology
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Summary:The approach used to model technological change in a climate policy model is a critical determinant of its results in terms of the time path of CO 2 prices and costs required to achieve various emission reduction goals. We provide an overview of the different approaches used in the literature, with an emphasis on recent developments regarding endogenous technological change, research and development, and learning. Detailed examination sheds light on the salient features of each approach, including strengths, limitations, and policy implications. Key issues include proper accounting for the opportunity costs of climate-related knowledge generation, treatment of knowledge spillovers and appropriability, and the empirical basis for parameterizing technological relationships. No single approach appears to dominate on all these dimensions, and different approaches may be preferred depending on the purpose of the analysis, be it positive or normative.
ISSN:0140-9883
1873-6181
DOI:10.1016/j.eneco.2008.03.001