Technological change, energy consumption, and the costs of environmental policy in energy–economy–environment modelling

An increasing number of empirical models analyse the economic and environmental impacts of policies that aim at reducing global climate change. Assumptions about technology are found to play a crucial role. Applied energy-economy-environment models propose different approaches to deal with technological change. Bottom-up models take into account many alternative technologies for future energy production and learning by doing of specific technologies. Top-down models consider autonomous energy efficiency improvements, backstop technologies, technology learning, and investment in research and development in response to market conditions. This paper discusses the different treatments of technological change and their impacts on energy consumption, the costs of environment policy and the timing of abatement measures.