Assessing Economic Impacts of Greenhouse Gas Mitigation Summary of a Workshop (2009) / Chapter Skim
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5 Enhancing Analytical Capabilities
5 Enhancing Analytical Capabilities
Pages 20-27
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From page 20... ...
He also outlined three approaches to representing technological change and stated that its representation is the single most unsatisfactory element in models: exogenous change, technological learning, and the Romer model. Exogenous technical change, projections based on historical trends, was the industry standard until the late 1990s, but the obvious problem is that as soon as one introduces changes in prices, particularly the price of carbon relative to other input prices, then technological change is induced.
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From page 21... ...
He pointed to a recent report that Germany and some other countries in Europe are expecting to increase energy R&D efforts after more than a decade of drastic declines -- trying to understand what drives this apparent inducement of technological change will be key to modeling issues. Richard Newell seconded the notion that empirical data is a critical limitation and suggested that there is a major need for more work in theoretical development of ways to model technological change.
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From page 22... ...
SOURCE: EPA, 2005. Brian Murray explained that the recent surge in biofuel production, and the targets that have been set in the United States out to 2030, have fundamentally altered the forest and agriculture models -- these changes are significant enough to create problems for the mathematical programming framework underpinning the models.
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From page 23... ...
, which is a database of control strategies for criteria pollutants and toxics, along with cost curves and associated emission reductions. OAQPS is working on adding GHG control technologies and is also cooperating with the Office of Atmospheric Programs to develop closer linkages between benefits assessments and large-scale CGE modeling.
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From page 24... ...
It is also crucial to engage a broader spectrum of disciplines beyond economics, and Rubin urged that sustained institutional support is necessary to reward interdisciplinary activity. He remarked that the ability to create and implement analytical models and theoretical constructs far outstrips the availability of empirical data to rigorously test these constructs -- creative experiments and historical data analysis, which he and colleagues have done in looking at technological learning curves, will help verify functions.
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From page 25... ...
Montgomery contended that modeling global costs requires understanding how the institutional settings in different countries will limit the efficiency of policies and the feasibility of achieving emissions reductions -- the rule of law and the existence of economic and political freedom are factors that will have an impact but are not modeled. On a related point, modeling policies in the United States, Canada, and the European Union requires also being able to model the perverse incentives and unintended consequences of command and control regulations, technology mandates, and targeted subsidies.
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From page 26... ...
He related this notion to the common conception of innovation being one of bold pathbreaking changes, which overlooks the minor breakthroughs that might bridge the gap enough to make new technologies commercially viable. Bryan Hubbell relayed the anecdote of research funding for land grant universities working on genetically modified crops in the late 1980s and early 1990s -- this basic research was designed to maximize spillovers and thus public benefit.
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From page 27... ...
Thus, he commented, more work needs to be done on characterizing full costs and full benefits. Richard Newell offered the caution that there needs to be a distinction between hypothetical opportunities and those that can be captured given existing conditions (including institutional impediments and regulations)
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