Optimal Multi-Phase Transition Paths toward A Stabilized Global Climate: Integrated Dynamic Requirements Analysis for the 'Tech Fix'
AbstractThis paper analyzes the requirements for a social welfare-optimized transition path toward a carbon-free economy, focusing particularly on the role of R&D and other technological measures to achieve timely supply-side transformations in the global production regime that will avert catastrophic climate instability. We construct a heuristic integrated model of macroeconomic growth constrained by geophysical system with climate feedbacks, including extreme weather damages from global warming driven by greenhouse gas emissions, and 'tipping point' for catastrophic runaway warming. A variety of options for technology development and implementation, each having a distinctive primary functionality CO2 emissions control, and the dynamic relationships and interactions among them are examined. The specifications recognize (i) the endogeneity and embodiment of technical innovations, and (ii) the irreversibility and long gestation periods of required intangible (R&D) and tangible capital formation. Efficient exercise of these options is shown to involve sequencing different investment and production activities in separate temporal "phases" that together form a transition path to a carbon free economy. To study the requirements of a timely (catastrophe-averting) transition, we formulate a sequence of optimal control sub-problems linked together by transversality conditions, the solution of which determines the optimum allocation of resources and sequencing of the several phases implied by the options under consideration. Ours is "planning-model" approach, which departs from conventional IAM exercises by eschewing assumptions about the behaviors of economic and political actors in response to market incentives and specific public policy measures. Solutions for each of several multi-phase models yields the optimal phase durations and rates of investment and production that characterize the transition path. Sensitivity experiments with parameters of economic and geophysical sub-systems provide insights into the robustness of the requirements analysis under variations in the technical and geophysical system parameters.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 12-006.
Date of creation: Dec 2012
Date of revision:
global warming; tipping points; catastrophic climate instability; technology fix options; R&D investments; capital-embodied innovations; optimal sequencing; IAM and DIRAM policy design approaches; multi-phase optimal control; sustainable endogenous growth;
Other versions of this item:
- David, Paul & Van Zon, Adriaan, 2012. "Optimal multi-phase transition paths toward a stabilized global climate: Integrated dynamic requirements analysis for the 'tech fix'," MERIT Working Papers 075, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-ENE-2012-12-22 (Energy Economics)
- NEP-ENV-2012-12-22 (Environmental Economics)
- NEP-INO-2012-12-22 (Innovation)
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