RP0063 – The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the Witch Model

Division ECIP - Economic analysis of Climate Impacts and Policy Division
4/2009

Authors

  • Valentina BosettiFEEM - Fondazione Eni Enrico Mattei, CMCC - Euro-Mediterranean Center on Climate Change
  • Carlo CarraroFEEM - Fondazione Eni Enrico Mattei, Ca' Foscari University of Venice, Department of Economics, CEPS - Centre for European Policy Studies, CEPR - Center for Economic Policy Research, CESifo - Center for Economic Studies and Ifo Institute for Economic Research, CMCC - Euro-Mediterranean Center on Climate Change, IPCC - Intergovernmental Panel on Climate Change, Working Group III
  • Romain DuvalOECD - Organization for Economic Co-Operation and Development
  • Alessandra SgobbiFEEM - Fondazione Eni Enrico Mattei, CMCC - Euro-Mediterranean Center on Climate Change
  • Massimo TavoniFEEM - Fondazione Eni Enrico Mattei, CMCC - Euro-Mediterranean Center on Climate Change
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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 for stabilisation costs more 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.

  • issn: H0, H2, H3, H4, O3, Q32, Q43, Q54
  • Keywords: Climate Policy, Energy R&D, Fund, Stabilisation Costs

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