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Induced Technological Change in a Limited Foresight Optimization Model

Fredrik Hedenus, Christian Azar and Kristian Lindgren

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-4
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The threat of global warming calls for a major transformation of the energy system in the coming century. The treatment of technological change in energy system models is a critical challenge. 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 incorporates 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 policies 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, primarily in the transport sector.

OPEC Strategies and Oil Rent in a Climate Conscious World

Daniel J.A. Johansson, Christian Azar, Kristian Lindgren and Tobias A. Persson 

Year: 2009
Volume: Volume 30
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No3-2
View Abstract

In the UNFCCC process, energy exporting countries (primarily OPEC) claim compensation for losses in expected oil rent due to CO2 mitigation measures. However, there are mechanisms that may raise rather than lower the oil rent. If a carbon price is implemented universally, the cost of using oil substitutes such as unconventional oil or synthetic diesel from coal or natural gas will increase even more than the cost of using conventional oil. Here, a dynamic model that takes into account OPEC�s dominant position in the world�s liquid fuel market is developed in order to analyze these mechanisms. In this model, OPEC is assumed to act as strategic leader while all other liquid fuel producers act as price-takers. We find that the net present value of OPEC�s conventional oil rent increases by about 5% due to the carbon prices needed to reach stringent CO2 emission targets. For less ambitious targets, the increase in oil rent could be even higher. An extensive sensitivity analysis is also performed, which corroborates the main result.

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