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The Dynamics of Carbon and Energy Intensity in a Model of Endogenous Technical Change

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  • Valentina Bosetti, Carlo Carraro and Marzio Galeotti

Abstract

In recent years, a large number of papers have explored different attempts to endogenise technical change in climate models. This recent literature has emphasized that four factors Ð two inputs and two outputs Ð should play a major role when modeling technical change in climate models. The two inputs are R&D investments and Learning by Doing, the two outputs are energy-saving and fuel switching. Indeed, R&D investments and Learning by Doing are the main drivers of a climate-friendly technical change that eventually affect both energy intensity and fuel-mix. In this paper, we present and discuss an extension of the FEEM-RICE model in which these four factors are explicitly accounted for. In our new specification of endogenous technical change, an index of energy technical change depends on both Learning by Researching and Learning by Doing. This index enters the equations defining energy intensity (i.e. the amount of carbon energy required to produce one unit of output) and carbon intensity (i.e. the level of carbonization of primarily used fuels). This new specification is embodied in the RICE 99 integrated assessment climate model and then used to generate a baseline scenario and to analyze the relationship between climate policy and technical change. Sensitivity analysis is performed on different key parameters of the energy module in order to obtain crucial insights into the relative importance of the main channels through which technological changes affects the impact of human activities on climate.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Endogenous Technological Change (2006)
Issue (Month): Special Issue #1 ()
Pages: 191-206

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Handle: RePEc:aen:journl:2006se-a09

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References

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  1. Marzio Galeotti & Sergio Vergalli & Efrem Castelnuovo & Gretel Gambarelli, 2003. "Learning by Doing vs Learning by Researching in a Model of Climate Change Policy Analysis," Working Papers 2003.11, Fondazione Eni Enrico Mattei.
  2. Marzio Galeotti & Carlo Carraro, 2004. "Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the FEEM-RICE Model," Working Papers 2004.152, Fondazione Eni Enrico Mattei.
  3. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  4. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Valentina Bosetti & Marzio Galeotti & Alessandro Lanza, 2004. "How Consistent are Alternative Short-Term Climate Policies with Long-Term Goals?," Working Papers 2004.157, Fondazione Eni Enrico Mattei.
  6. Gerlagh, Reyer & van der Zwaan, Bob, 2003. "Gross world product and consumption in a global warming model with endogenous technological change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 35-57, February.
  7. Marzio Galeotti, 2003. "Environment and Economic Growth: Is Technical Change the Key to Decoupling?," Working Papers 2003.90, Fondazione Eni Enrico Mattei.
  8. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  9. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
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Citations

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Cited by:
  1. GRIMAUD André & LAFFORGUE Gilles & MAGNE Bertrand, 2007. "Innovation markets in the policy appraisal of climate change mitigation," LERNA Working Papers 07.12.233, LERNA, University of Toulouse.
  2. GRIMAUD André & LAFFORGUE Gilles & MAGNE Bertrand, 2008. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," LERNA Working Papers 08.10.254, LERNA, University of Toulouse.
  3. Marzio Galeotti & Carlo Carraro, 2004. "Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the FEEM-RICE Model," Working Papers 2004.152, Fondazione Eni Enrico Mattei.
  4. Enrica De Cian, 2006. "International Technology Spillovers in Climate-Economy Models: Two Possible Approaches," Working Papers 2006.141, Fondazione Eni Enrico Mattei.
  5. Kahouli-Brahmi, Sondes, 2008. "Technological learning in energy-environment-economy modelling: A survey," Energy Policy, Elsevier, vol. 36(1), pages 138-162, January.
  6. GRIMAUD André & LAFFORGUE Gilles & MAGNE Bertrand, 2007. "Economic growth and Climate change in a decentralized Economy: A Theoretical and Empirical Approach," LERNA Working Papers 07.04.225, LERNA, University of Toulouse.
  7. Dannenberg, Astrid & Mennel, Tim & Moslener, Ulf, 2007. "What Does Europe Pay for Clean Energy? Review of Macroeconomic Simulation Studies," ZEW Discussion Papers 07-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Kuik, Onno & Brander, Luke & Tol, Richard S.J., 2009. "Marginal abatement costs of greenhouse gas emissions: A meta-analysis," Energy Policy, Elsevier, vol. 37(4), pages 1395-1403, April.
  9. Nicola Cantore & Emilio Padilla, 2007. "Equity and CO2 emissions distribution in climate change integrated assessment modelling," DEIAgra Working Papers 7001, Alma Mater Studiorum University of Bologna, Department of Agricultural Economics and Engineering, revised May 2007.
  10. Bretschger, Lucas & Ramer, Roger & Schwark, Florentine, 2011. "Growth effects of carbon policies: Applying a fully dynamic CGE model with heterogeneous capital," Resource and Energy Economics, Elsevier, vol. 33(4), pages 963-980.
  11. Rick Baker & Andrew Barker & Alan Johnston & Michael Kohlhaas, 2008. "The Stern Review: an assessment of its methodology," Staff Working Papers 0801, Productivity Commission, Government of Australia.
  12. Hammar, Henrik & Löfgren, Åsa, 2007. "Explaining adoption of end of pipe solutions and clean technologies," Working Paper 102, National Institute of Economic Research.
  13. Elizabeth Stanton, 2011. "Negishi welfare weights in integrated assessment models: the mathematics of global inequality," Climatic Change, Springer, vol. 107(3), pages 417-432, August.
  14. Lucas Bretschger & Roger Ramer & Florentine Schwark, 2010. "Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE model with Heterogeneous Capital," CER-ETH Economics working paper series 10/129, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  15. Nicola Cantore & Emilio Padilla, 2007. "Equity and CO2 Emissions Distribution in Climate Change Integrated Assessment," Working Papers wpdea0705, Department of Applied Economics at Universitat Autonoma of Barcelona.

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