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What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D

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  • Bosetti, Valentina
  • Carraro, Carlo
  • Duval, Romain
  • Tavoni, Massimo

Abstract

This paper addresses two basic issues related to technological innovation and climate stabilization objectives: can innovation policies be effective in stabilizing climate? To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of the technical progress in the energy sector. We evaluate a range of innovation policies, both as stand-alone and in combination with other mitigation policies. Our analysis indicates that innovation policies alone are unlikely to stabilize global concentration and temperature. As for the benefits of combining climate and innovation policies, we find efficiency gains of 10% (6 USD Trillions in net present value terms) for a stringent climate policy, and 30% (3 USD Trillions) for a milder one. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 6 ()
Pages: 1313-1320

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1313-1320

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Climate change; Environmental policy; Energy R&D fund; Stabilization costs;

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References

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  1. Valentina Bosetti & Carlo Carraro & Emanuele Massetti & Massimo Tavoni, 2007. "International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization," CESifo Working Paper Series 2151, CESifo Group Munich.
  2. Valentina Bosetti & Emanuele Massetti & Massimo Tavoni, 2007. "The WITCH Model. Structure, Baseline, Solutions," Working Papers 2007.10, Fondazione Eni Enrico Mattei.
  3. Klaassen, Ger & Miketa, Asami & Larsen, Katarina & Sundqvist, Thomas, 2005. "The impact of R&D on innovation for wind energy in Denmark, Germany and the United Kingdom," Ecological Economics, Elsevier, vol. 54(2-3), pages 227-240, August.
  4. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
  5. Valentina Bosetti & Carlo Carraro & Romain Duval & Alessandra Sgobbi & Massimo Tavoni, 2009. "The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the WITCH Model," OECD Economics Department Working Papers 664, OECD Publishing.
  6. Valentina Bosetti, Carlo Carraro, Marzio Galeotti, Emanuele Massetti, Massimo Tavoni, 2006. "A World induced Technical Change Hybrid Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 13-38.
  7. Patrik Söderholm & Ger Klaassen, 2007. "Wind Power in Europe: A Simultaneous Innovation–Diffusion Model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(2), pages 163-190, February.
  8. Tooraj Jamasb, 2007. "Technical Change Theory and Learning Curves: Patterns of Progress in Electricity Generation Technologies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 51-72.
  9. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  10. 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.
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Cited by:
  1. Hübler, Michael & Baumstark, Lavinia & Leimbach, Marian & Edenhofer, Ottmar & Bauer, Nico, 2012. "An integrated assessment model with endogenous growth," ZEW Discussion Papers 12-054, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
  3. Jewell, Jessica & Cherp, Aleh & Riahi, Keywan, 2014. "Energy security under de-carbonization scenarios: An assessment framework and evaluation under different technology and policy choices," Energy Policy, Elsevier, vol. 65(C), pages 743-760.
  4. Enrica Cian & Valentina Bosetti & Massimo Tavoni, 2012. "Technology innovation and diffusion in “less than ideal” climate policies: An assessment with the WITCH model," Climatic Change, Springer, vol. 114(1), pages 121-143, September.
  5. Wei Jin & ZhongXiang Zhang, 2014. "On the Mechanism of International Technology Diffusion for Energy Productivity Growth," CCEP Working Papers 1405, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  6. Giacomo Marangoni & Massimo Tavoni, 2013. "The Clean Energy R&D Strategy for 2°C," Working Papers 2013.93, Fondazione Eni Enrico Mattei.
  7. Massimo Tavoni & Enrica Cian & Gunnar Luderer & Jan Steckel & Henri Waisman, 2012. "The value of technology and of its evolution towards a low carbon economy," Climatic Change, Springer, vol. 114(1), pages 39-57, September.

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