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

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

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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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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