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Assessment of CO2 Reductions and Economic Impacts Considering Energy-Saving Investments

Using a global dynamic optimization model that includes a notion of endogenous energy-saving investments, economic impacts and energy-system changes are assessed under several policy cases where CO2 concentration is stabilized at the 450, 500, and 550 ppm levels by the year 2100. The effect of increased investments in energy-saving technologies on energy efficiency is derived exogenously from results of the AIM/Enduse model applied to Japan, then endogenized in the global dynamic optimization model.We find that with diffusion of energy-saving technologies, GDP loss during the 21st century falls from 2.5% to 2.1% in the 450 ppm case. The impact is small for the 550 ppm case, however, because a shift to low-carbon-intensive energies such as gas and renewable energies does not occur to a significant extent under this target.

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Energy Specializations: Energy Investment and Finance – Corporate Strategy; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
D92 - Intertemporal Firm Choice: Investment, Capacity, and Financing
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: CO2 emissions reduction, AIM model, Energy-saving technology, Investment, Energy efficiency

DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-8

Published in Endogenous Technological Change, Special Issue #1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.