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The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the WITCH Model

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  • Valentina Bosetti
  • Carlo Carraro
  • Romain Duval
  • Alessandra Sgobbi
  • Massimo Tavoni

Abstract

This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful – especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters more for stabilisation costs than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required. Le rôle de la R&D and de la diffusion des technologies dans l'atténuation du changementclimatique : nouvelles perspectives à l'aide du modèle WITCH Cet article utilise le modèle WITCH, un modèle d’équilibre général calculable à progrès technique endogène, afin d’explorer l’impact de diverses politiques climatiques sur les choix de technologies énergétiques et les coûts de stabilisation des concentrations de gaz à effet de serre. Il apparaît que les prix courants et anticipés du carbone ont des effets puissants sur la dépense en R&D et la diffusion des technologies propres. Leur impact sur les coûts de stabilisation dépend de la nature de la R&D : une R&D améliorant l’efficacité énergétique de façon incrémentale a des effets limités, mais une R&D visant à l’émergence de nouvelles technologies sobres en carbone pourrait drastiquement réduire les coûts en cas de succès – notamment dans le secteur non-électrique, où de telles options sobres en carbone sont aujourd’hui rares. Les émissions provenant de sources multiples, garder un éventail d’options aussi large que possible influence davantage les coûts de stabilisation qu’améliorer certaines technologies spécifiques. Du fait des externalités internationales liées à la R&D, les coûts de stabilisation peuvent être encore réduits par une politique complémentaire de R&D mondiale. Cependant, un signal de prix fort est toujours nécessaire.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 664.

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Date of creation: 06 Feb 2009
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Handle: RePEc:oec:ecoaaa:664-en

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Keywords: energy R&D; fund; stabilisation costs; climate policy; R&D énergétique; fonds; coûts de stabilisation; politique climatique;

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Cited by:
  1. Ahmed, Khalid & Long, Wei, 2010. "Adaptation as a Response to Climate Change: A Literature Review," MPRA Paper 45024, University Library of Munich, Germany, revised Mar 2011.
  2. Christian Le Bas & Nicolas Poussing, 2013. "Firm voluntary measures for environmental changes, eco-innovations and CSR : Empirical analysis based on data surveys," Working Papers halshs-00838005, HAL.
  3. Frederick van der Ploeg & Cees Withagen, 2011. "Optimal Carbon Tax with a Dirty Backstop - Oil, Coal, or Renewables?," CESifo Working Paper Series 3334, CESifo Group Munich.
  4. Frederick Van der Ploeg & Cees A. Withagen, 2011. "Too Little Oil, Too Much Coal: Optimal Carbon Tax and when to Phase in Oil, Coal and Renewables," CESifo Working Paper Series 3526, CESifo Group Munich.
  5. Veugelers, Reinhilde, 2012. "Which policy instruments to induce clean innovating?," Research Policy, Elsevier, vol. 41(10), pages 1770-1778.
  6. Richard Perkins & Eric Neumayer, 2009. "How do domestic attributes affect international spillovers of CO2-efficiency?," Grantham Research Institute on Climate Change and the Environment Working Papers 8, Grantham Research Institute on Climate Change and the Environment.
  7. Valentina Bosetti & Ruben Lubowski & Alexander Golub & Anil Markandya, 2010. "Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation," Working Papers 2009-01, BC3.
  8. Alice Favero & Enrica De Cian, 2010. "Fairness, Credibility and Effectiveness in the Copenhagen Accord: An Economic Assessment," Working Papers 2010.21, Fondazione Eni Enrico Mattei.
  9. van der Vooren & Eric Brouillat, 2013. "Evaluating CO2 reduction policy portfolios in the automotive sector," Innovation Studies Utrecht (ISU) working paper series 13-01, Utrecht University, Department of Innovation Studies, revised Feb 2013.
  10. Valentina Bosetti & Carlo Carraro & Romain Duval & Massimo Tavoni, 2010. "What Should we Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D," CESifo Working Paper Series 2998, CESifo Group Munich.
  11. Emanuele Massetti & Andrea Bastianin & Alice Favero, 2010. "Investments and Financial Flows Induced by Climate Mitigation Policies," Working Papers 2010.13, Fondazione Eni Enrico Mattei.
  12. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers 2009.64, Fondazione Eni Enrico Mattei.
  13. Richard Perkins & Eric Neumayer, 2012. "Do recipient country characteristics affect international spillovers of CO 2-efficiency via trade and foreign direct investment?," Climatic Change, Springer, vol. 112(2), pages 469-491, May.
  14. Frederick van der Ploeg & Cees Withagen, 2010. "Growth and the Optimal Carbon Tax: When to switch from exhaustible resources to renewables?," OxCarre Working Papers 055, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  15. Carlo Carraro & Francesco Bosello & Enrica De Cian, 2009. "An Analysis of Adaptation as a Response to Climate Change," Working Papers 2009_26, Department of Economics, University of Venice "Ca' Foscari".

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