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A World induced Technical Change Hybrid Model

Abstract:
The need for a better understanding of future energy scenarios, of their compatibility with the objective of stabilizing greenhouse gas concentrations, and of their links with climate policy, calls for the development of hybrid models. Hybrid because both the technological detail typical of Bottom Up (BU) models and the long run dynamics typical of Top Down (TD) models are crucially necessary. We present WITCH � World Induced Technical Change Hybrid model � a neoclassical optimal growth model (TD) with energy input detail (BU). The model endogenously accounts for technological progress, both through learning curves affecting prices of new vintages of capital and through R&D investments. In addition, the model captures the main economic interrelationships between world regions and is designed to analyze the optimal economic and environment policies in each world region as the outcome of a dynamic game. This paper provides a detailed description of the WITCH model, of its Baseline, and of the model calibration procedure.

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Energy Specializations: Energy Modeling – Other; Energy and the Environment – Climate Change and Greenhouse Gases

JEL Codes:
C59 - Econometric Modeling: Other
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: WITCH model, Climate Policy, Hybrid Modelling, Integrated Assessment, Technological Change, Energy Mix

DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI2-2


Published in Hybrid Modeling, Special Issue #2 of The bi-monthly Journal of the IAEE's Energy Economics Education Foundation.