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Impact Assessment of Emissions Stabilization Scenarios with and without Induced Technological Change

  • Claudia Kemfert
  • Truong P. Truong

The main aim of this paper is to investigate quantitatively the economic impacts of emissions stabilization scenarios with and without the inclusion of induced technological change (ITC). Improved technological innovations are triggered by increased R&D expenditures that advance energy efficiencies. Model results show that induced technological changes due to increased investment in R&D reduce compliance costs. Although R&D expenditures compete with other investment expenditures, we find that increased R&D expenditures improve energy efficiency which substantially lowers abatement costs. Without the inclusion of induced technological change, emissions targets are primarily reached by declines in production, resulting in overall welfare reductions. With the inclusion of induced technological changes, emissions mitigations can result in fewer production and GDP drawbacks.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43861.de/dp530.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 530.

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Length: 16 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:diw:diwwpp:dp530
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  1. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  2. Ottmar Edenhofer, Kai Lessmann, Claudia Kemfert, Michael Grubb and Jonathan Kohler , 2006. "Induced Technological Change: Exploring its Implications for the Economics of Atmospheric Stabilization: Synthesis Report from the Innovation Modeling Comparison Project," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 57-108.
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  5. Claudia Kemfert, 2004. "Induced Technological Change in a Multi-regional, Multi-sectoral Integrated Assessment Model (WIAGEM): Impact Assessment of Climate Policy Strategies," Discussion Papers of DIW Berlin 435, DIW Berlin, German Institute for Economic Research.
  6. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Claudia Kemfert, 2005. "Global Climate Protection: Immediate Action Will Avert High Costs," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 1(12), pages 135-141.
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  15. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  16. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
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  18. Sue Wing, Ian, 2006. "Representing induced technological change in models for climate policy analysis," Energy Economics, Elsevier, vol. 28(5-6), pages 539-562, November.
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