Induced Technological Change in a Limited Foresight Optimization Model

29 Pages Posted: 9 Nov 2005

See all articles by Fredrik Hedenus

Fredrik Hedenus

Chalmers University of Technology

Christian Azar

Chalmers University of Technology

Kristian Lindgren

Chalmers University of Technology

Date Written: October 2005

Abstract

The threat of global warming calls for a major transformation of the energy system the coming century. Modeling technological change is an important factor in energy systems modeling. Technological change may be treated as induced by climate policy or as exogenous. We investigate the importance of induced technological change (ITC) in GET-LFL, an iterative optimization model with limited foresight that includes learning-by-doing. Scenarios for stabilization of atmospheric CO2 concentrations at 400, 450, 500 and 550 ppm are studied. We find that the introduction of ITC reduces the total net present value of the abatement cost over this century by 3-9% compared to a case where technological learning is exogenous. Technology specific polices which force the introduction of fuel cell cars and solar PV in combination with ITC reduce the costs further by 4-7% and lead to significantly different technological solutions in different sectors, primarily in the transport sector.

Keywords: Energy system model, Limited foresight, Climate policy, Endougenous learning, Technological lock-in

JEL Classification: O33

Suggested Citation

Hedenus, Fredrik and Azar, Christian and Lindgren, Kristian, Induced Technological Change in a Limited Foresight Optimization Model (October 2005). FEEM Working Paper No. 125.05, Available at SSRN: https://ssrn.com/abstract=841145 or http://dx.doi.org/10.2139/ssrn.841145

Fredrik Hedenus (Contact Author)

Chalmers University of Technology ( email )

SE-412 96 Goteborg
Sweden

Christian Azar

Chalmers University of Technology ( email )

SE-412 96 Goteborg
Sweden

Kristian Lindgren

Chalmers University of Technology ( email )

SE-412 96 Goteborg
Sweden

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