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Optimal CO2-abatement with socio-economic inertia and induced technological change

Author

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  • Malte Schwoon
  • Richard S.J. Tol

    (Economic and Social Research Institute, Dublin)

Abstract

The impact of induced technological change (ITC) in energy/climate models on the timing of optimal CO2-abatement depends on whether R&D or learning-by-doing (LBD) is the driving force. Bottom-up energy system models employing LBD suggest strong increases in optimal early abatement. In this paper we extend an existing top-down model supporting this view according to the notion that socio-economic inertia interferes with rapid technological change. We derive analytical results concerning the impact of inertia and ITC on optimal initial abatement and show a wide range of numerical simulations to illustrate magnitudes. Inertia now dominates the timing decision on early abatement, such that LBD might even have a negative effect on early abatement and the impact of R&D is limited. However, ITC still reduces costs of stabilizing atmospheric CO2-concentrations considerably.

Suggested Citation

  • Malte Schwoon & Richard S.J. Tol, 2004. "Optimal CO2-abatement with socio-economic inertia and induced technological change," Working Papers FNU-37, Research unit Sustainability and Global Change, Hamburg University, revised Jan 2004.
    • Handle: RePEc:sgc:wpaper:37
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    Cited by:

    1. Popp, David & Santen, Nidhi & Fisher-Vanden, Karen & Webster, Mort, 2013. "Technology variation vs. R&D uncertainty: What matters most for energy patent success?," Resource and Energy Economics, Elsevier, vol. 35(4), pages 505-533.
    2. Lennox, James A. & Witajewski-Baltvilks, Jan, 2017. "Directed technical change with capital-embodied technologies: Implications for climate policy," Energy Economics, Elsevier, vol. 67(C), pages 400-409.
    3. Guo, Jian-Xin & Zhu, Lei & Fan, Ying, 2016. "Emission path planning based on dynamic abatement cost curve," European Journal of Operational Research, Elsevier, vol. 255(3), pages 996-1013.
    4. Vogt-Schilb, Adrien & Hallegatte, Stéphane, 2014. "Marginal abatement cost curves and the optimal timing of mitigation measures," Energy Policy, Elsevier, vol. 66(C), pages 645-653.
    5. Raymond J.G.M. Florax & Henri L.F. de Groot & Peter Mulder, 2011. "Energy Efficiency and Technological Change," Chapters, in: Raymond J.G.M. Florax & Henri L.F. de Groot & Peter Mulder (ed.), Improving Energy Efficiency through Technology, chapter 1, Edward Elgar Publishing.
    6. Pizer, William A. & Popp, David, 2008. "Endogenizing technological change: Matching empirical evidence to modeling needs," Energy Economics, Elsevier, vol. 30(6), pages 2754-2770, November.
    7. Popp, David & Newell, Richard G. & Jaffe, Adam B., 2010. "Energy, the Environment, and Technological Change," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 873-937, Elsevier.
    8. Vogt-Schilb, Adrien & Meunier, Guy & Hallegatte, Stéphane, 2018. "When starting with the most expensive option makes sense: Optimal timing, cost and sectoral allocation of abatement investment," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 210-233.
    9. Vogt-Schilb, Adrien & Meunier, Guy & Hallegatte, Stephane, 2012. "How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy," Policy Research Working Paper Series 6154, The World Bank.
    10. Bistline, John E., 2016. "Energy technology R&D portfolio management: Modeling uncertain returns and market diffusion," Applied Energy, Elsevier, vol. 183(C), pages 1181-1196.
    11. Edward B. Barbier, 2013. "Is a global crisis required to prevent climate change? A historical–institutional perspective," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 28, pages 598-614, Edward Elgar Publishing.
    12. Edward B. Barbier, 2012. "Économie verte et développement durable : enjeux de politique économique," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 97-117.
    13. Weiwei Xiong & Katsumasa Tanaka & Philippe Ciais & Daniel J. A. Johansson & Mariliis Lehtveer, 2022. "emIAM v1.0: an emulator for Integrated Assessment Models using marginal abatement cost curves," Papers 2212.12060, arXiv.org.
    14. repec:hal:ciredw:hal-00916328 is not listed on IDEAS
    15. Adrien Vogt-Schilb & St�phane Hallegatte & Christophe de Gouvello, 2015. "Marginal abatement cost curves and the quality of emission reductions: a case study on Brazil," Climate Policy, Taylor & Francis Journals, vol. 15(6), pages 703-723, November.
    16. repec:hal:wpaper:hal-00916328 is not listed on IDEAS
    17. Vogt-Schilb, Adrien & Hallegatte, Stephane, 2011. "When starting with the most expensive option makes sense : use and misuse of marginal abatement cost curves," Policy Research Working Paper Series 5803, The World Bank.
    18. 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.
    19. Edward Barbier, 2011. "The policy challenges for green economy and sustainable economic development," Natural Resources Forum, Blackwell Publishing, vol. 35(3), pages 233-245, August.
    20. Giorgio Ferrari & Torben Koch, 2019. "On a strategic model of pollution control," Annals of Operations Research, Springer, vol. 275(2), pages 297-319, April.
    21. Ferrari, Giorgio & Koch, Torben, 2018. "On a Strategic Model of Pollution Control," Center for Mathematical Economics Working Papers 586, Center for Mathematical Economics, Bielefeld University.

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    More about this item

    Keywords

    climate policy; technological change; inertia;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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