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Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market

Paul Gallagher and Donald Johnson

Year: 1999
Volume: Volume20
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No2-4
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Abstract:
This study examines the adoption prospects and market effects for fuels made from agricultural materials. New ethanol processing methods may eventually enable ethanol production from cellulose materials. A cost analysis suggests that corn residue-based production could be competitive with petroleum based gasoline because land-cost recovery is unnecessary. A supply analysis for U.S. corn residue accounts for potential livestock use and environmental factors. Some simulations are based on a petroleum market model, the residue supply estimate, and adoption of the new ethanol processing technology; results suggest a petroleum price reduction. The benefit-cost analysis for this technology accounts for the oligopoly-offsetting effect of additional supplies and the option valuef or loss reductions in the event of an embargo. Substantial underestimates of the technology benefit will occur unless the chance of embargo and oligopoly pricing are taken into account.



Technological Change for Atmospheric Stabilization: Introductory Overview to the Innovation Modeling Comparison Project

Michael Grubb, Carlo Carraro and John Schellnhuber

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-1
No Abstract



The Transition to Endogenous Technical Change in Climate-Economy Models: A Technical Overview to the Innovation Modeling Comparison Project

Jonathan Kohler, Michael Grubb, David Popp and Ottmar Edenhofer 

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-2
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Abstract:
This paper assesses endogenous technical change (ETC) in climate-economy models, using the models in the Innovation Modeling Comparison Project (IMCP) as a representative cross-section. ETC is now a feature of most leading models. Following the new endogenous growth literature and the application of learning curves to the energy sector, there are two main concepts employed: knowledge capital and learning curves. The common insight is that technical change is driven by the development of knowledge capital and its characteristics of being partly non-rival and partly non-excludable. There are various different implementations of ETC. Recursive CGE models face particular difficulties in incorporating ETC and increasing returns. The main limitations of current models are: the lack of uncertainty analysis; the limited representation of the diffusion of technology; and the homogeneous nature of agents in the models including the lack of representation of institutional structures in the innovation process.



Induced Technological Change: Exploring its Implications for the Economics of Atmospheric Stabilization: Synthesis Report from the Innovation Modeling Comparison Project

Ottmar Edenhofer, Kai Lessmann, Claudia Kemfert, Michael Grubb and Jonathan Kohler 

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-3
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Abstract:
This paper summarizes results from ten global economy-energy-environment models implementing mechanisms of endogenous technological change (ETC). Climate policy goals represented as different CO2 stabilization levels are imposed, and the contribution of induced technological change (ITC) to meeting the goals is assessed. Findings indicate that climate policy induces additional technological change, in some models substantially. Its effect is a reduction of abatement costs in all participating models. The majority of models calculate abatement costs below 1 percent of present value aggregate gross world product for the period 2000-2100. The models predict different dynamics for rising carbon costs, with some showing a decline in carbon costs towards the end of the century. There are a number of reasons for differences in results between models; however four major drivers of differences are identified. First, the extent of the necessary CO2 reduction which depends mainly on predicted baseline emissions, determines how much a model is challenged to comply with climate policy. Second, when climate policy can offset market distortions, some models show that not costs but benefits accrue from climate policy. Third, assumptions about long-term investment behavior, e.g. foresight of actors and number of available investment options, exert a major influence. Finally, whether and how options for carbon-free energy are implemented (backstop and end-of-the-pipe technologies) strongly affects both the mitigation strategy and the abatement costs.



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
View Abstract

Abstract:
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.



Importance of Technological Change and Spillovers in Long-Term Climate Policy

Shilpa Rao, Ilkka Keppo and Keywan Riahi

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-5
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Abstract:
This paper examines the role of technological change and spillovers within the context of a climate policy in a long-term scenario of the global energy system. We use the energy-systems optimization model MESSAGE considering endogenous learning for various technologies, such that they experience cost reductions as a function of accumulated capacity installations. We find that the existence of technological learning while reducing overall energy system costs becomes particularly important in the context of a long-term climate policy. Diversity in technological portfolios is emphasized and results indicate deployment of a range of energy technologies in reducing emissions. An important finding is that technological learning by itself is not sufficient for climate stabilization and that climate policies are an absolute necessary complimentary element. Under a climate constraint, spillovers across technologies and regions due to learning results in increased upfront investments and hence lower costs of carbon free technologies, thus resulting in technology deployment and emissions reductions, especially in developing countries. We conclude that learning and spillover effects can lead to technologically advanced cost-effective global energy transition pathways. We suggest that coordinated climate stabilization policies can serve as important institutional mechanisms that facilitate the required technological investments, especially in developing countries and thus ensure long-term cost reductions.



Analysis of Technological Portfolios for CO2 Stabilizations and Effects of Technological Changes

Fuminori Sano, Keigo Akimoto, Takashi Homma and Toshimasa Tomoda

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-6
View Abstract

Abstract:
In this study, cost-effective technological options to stabilize CO2 concentrations at 550, 500, and 450 ppmv are evaluated using a world energy systems model of linear programming with a high regional resolution. This model treats technological change endogenously for wind power, photovoltaics, and fuel-cell vehicles, which are technologies of mass production and are considered to follow the �learning by doing� process. Technological changes induced by climate policies are evaluated by maintaining the technological changes at the levels of the base case wherein there is no climate policy. The results achieved through model analyses ixnclude 1) cost-effective technological portfolios, including carbon capture and storage, marginal CO2 reduction costs, and increases in energy system cost for three levels of stabilization and 2) the effect of the induced technological change on the above mentioned factors. A sensitivity analysis is conducted with respect to the learning rate.



Comparison of Climate Policies in the ENTICE-BR Model

David Popp

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-7
View Abstract

Abstract:
This paper uses the ENTICE-BR model to study the effects of various climate stabilization policies. Because the ENTICE-BR model includes benefits from reduced climate damages, it is possible to calculate the net economic impact of each policy. In general, only the least restrictive concentration limit is welfare enhancing. While the policies are welfare enhancing in simulations using optimistic assumptions about the potential of the backstop energy technology, such assumptions mean that the backstop is also used in the no-policy base case, so that climate change itself is less of a problem. Finally, assumptions about the nature of R&D markets are important. Removing the assumption of partial crowding out from energy R&D nearly doubles the gains from policy-induced energy R&D.



Mitigation Strategies and Costs of Climate Protection: The Effects of ETC in the Hybrid Model MIND

Ottmar Edenhofer, Kai Lessmann, Nico Bauer

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-10
View Abstract

Abstract:
MIND is a hybrid model incorporating several energy related sectors in an endogenous growth model of the world economy. This model structure allows a better understanding of the linkages between the energy sectors and the macro-economic environment. We perform a sensitivity analysis and parameter studies to improve the understanding of the economic mechanisms underlying opportunity costs and the optimal mix of mitigation options. Parameters representing technological change that permeates the entire economy have a strong impact on both the opportunity costs of climate protection and on the optimal mitigation strategies e.g. parameters in the macro-economic environment and in the extraction sector. Sector-specific energy technology parameters change the portfolio of mitigation options but have only modest effects on opportunity costs e.g. learning rate of the renewable energy technologies. We conclude that feedback loops between the macro-economy and the energy sectors are crucial for the determination of opportunity costs and mitigation strategies.



ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization

Reyer Gerlagh

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-11
View Abstract

Abstract:
We assess the effect of ITC in a global growth model, � DEMETER-1CCS � with learning-by-doing, where energy savings, energy transition and carbon capturing and sequestration (CCS) are the three main options for emissions reductions. The model accounts for technological change based on learning by doing, embodied in capital installed in previous periods. We run five scenarios: one baseline scenario with no climate change policy and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emissions reductions and the investment strategy is relatively independent of the endogeneity of technological change. More important is the vintages� structure of production. ITC does reduce costs by approximately a factor of 2, however, these benefits only materialize after some decades.




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