Can we Move to a Low Carbon Economy with Little Costs? A View from the Perspective of Uncertain Endogenous Technological Change

Ma T (2009). Can we Move to a Low Carbon Economy with Little Costs? A View from the Perspective of Uncertain Endogenous Technological Change. Conference presentation: CSM'2009: 22nd Workshop on Methodologies and Tools for Complex System Modeling, 31 August - 2 September 2009, IIASA, Laxenburg, Austria

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Abstract

Many people worry about that moving to a low carbon economy need high investment on new technologies and thus it will restrain the development of the economy. Is there any path which can lead the economy to a low carbon one with little cost? Our study tries to show some light on this issue from the perspective of optimization models of uncertain endogenous technological change by using a simplified energy system model as a heuristic research device.

The deliberately highly stylized model supposes one primary resource (e.g., coal), the extraction cost of which increases over time as a function of resource depletion. The economy demands one homogeneous good (e.g., electricity) and the exogenous demand increases over time. There are three kinds of technologies, namely, "existing," "incremental," and "revolutionary" that can be used to produce the goods. The "existing" and "incremental" technologies need to consume primary resources to produce the goods, while the "revolutionary" technology needs hardly any resource input. The "existing" technology is assumed to be entirely mature, and it has no learning potential, i.e., its cost will not decrease with the increase of cumulative experience of using it. An example is coal power plants. The "incremental" technology has a slight efficiency advantage. With a higher initial investment cost than that of the "existing" technology (a factor of 2 higher), it has potential for technological learning. An example is gas turbines. The "revolutionary" technology's initial investment cost is much higher than that of the "incremental" technology (and by a factor of 30 higher than the "existing" technology), but its learning potential is also higher. An example is photovoltaic cells. Technological learning is uncertain. An uncertain learning rate is represented by an uncertainty range around the mean value adopted, based on a lognormal distribution that is in accordance with empirical data. With the homogeneous good and the three different technologies, optimization is run to minimize the total discounted cost of the economic system; thus the results denote optimized paths of technology development and adoption.

Our study shows that with technological learning, two different development paths may have very similar total costs. And these two technology development paths may result in totally different emission paths, which means there is opportunity that an economy can be led to a low carbon one without much additional cost.

Item Type: Other
Uncontrolled Keywords: Low carbon economy; Endogenous technological change; Uncertainty; Technological learning
Research Programs: Transitions to New Technologies (TNT)
Bibliographic Reference: Conference presentation: CSM'2009: 22nd Workshop on Methodologies and Tools for Complex System Modeling, 31 August - 2 September 2009, IIASA, Laxenburg, Austria
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:42
Last Modified: 20 Jan 2016 16:45
URI: http://pure.iiasa.ac.at/9030

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