The influence of negative emission technologies and technology policies on the optimal climate mitigation portfolio

Combining policies to remove carbon dioxide (CO₂) from the atmosphere with policies to reduce emissions could decrease CO₂ concentrations faster than possible via natural processes. We model the optimal selection of a dynamic portfolio of abatement, research and development (R&D), and negative emission policies under an exogenous CO₂ constraint and with stochastic technological change. We find that near-term abatement is not sensitive to the availability of R&D policies, but the anticipated availability of negative emission strategies can reduce the near-term abatement optimally undertaken to meet 2°C temperature limits. Further, planning to deploy negative emission technologies shifts optimal R&D funding from ??carbon-free?? technologies into ??emission intensity?? technologies. Making negative emission strategies available enables an 80% reduction in the cost of keeping year 2100 CO₂ concentrations near their current level. However, negative emission strategies are less important if the possibility of tipping points rules out using late-century net negative emissions to temporarily overshoot the CO₂ constraint earlier in the century.     

Carbon capture and storage: combining economic analysis with expert elicitations to inform climate policy

The relationship between R&D investments and technical change is inherently uncertain. In this paper we combine economics and decision analysis to incorporate the uncertainty of technical change into climate change policy analysis. We present the results of an expert elicitation on the prospects for technical change in carbon capture and storage. We find a significant amount of disagreement between experts, even over the most mature technology; and this disagreement is most pronounced in regards to cost estimates. We then use the results of the expert elicitations as inputs to the MiniCAM integrated assessment model, to derive probabilistic information about the impacts of R&D investments on the costs of emissions abatement. We conclude that we need to gather more information about the technical and societal potential for Carbon Storage; cost differences among the different capture technologies play a relatively smaller role.     

Expert views - and disagreements - about the potential of energy technology R&D

Mitigating climate change will require innovation in energy technologies. Policy makers are faced with the question of how to promote this innovation, and whether to focus on a few technologies or to spread their bets. We present results on the extent to which public R&D might shape the future cost of energy technologies by 2030. We bring together three major expert elicitation efforts carried out by researchers at UMass Amherst, Harvard, and FEEM, covering nuclear, solar, Carbon Capture and Storage (CCS), bioelectricity, and biofuels. The results show experts believe that there will be cost reductions resulting from R&D and report median cost reductions around 20 % for most of the technologies at the R&D budgets considered. Although the improvements associated to solar and CCS R&D show some promise, the lack of consensus across studies, and the larger magnitude of the R&D investment involved in these technologies, calls for caution when defining what technologies would benefit the most from additional public R&D. In order to make R&D funding decisions to meet particular goals, such as mitigating climate change or improving energy security, or to estimate the social returns to R&D, policy makers need to combine the information provided in this study on cost reduction potentials with an analysis of the macroeconomic implications of these technological changes. We conclude with recommendations for future directions on energy expert elicitations.     

R&D Subsidies and Climate Policy: Is There a “Free Lunch”?

Because of the long-term nature of the climate problem, technological advances are often seen as an important component of any solution. However, when considering the potential for technology to help solve the climate problem, two market failures exist which lead to underinvestment in climate-friendly R&D: environmental externalities and the public goods nature of new knowledge. As a result, government subsidies to climate-friendly R&D projects are often proposed as part of a policy solution. Using the ENTICE model, I analyze the effectiveness of such subsidies, both with and without other climate policies, such as a carbon tax. While R&D subsidies do lead to significant increases in climate-friendly R&D, this R&D has little impact on the climate itself. Subsidies address the problem of knowledge as a public good, but they do not address the environmental externality, and thus offer no additional incentive to adopt new technologies. Moreover, high opportunity costs to R&D limit the potential role that subsidies can play. While R&D subsidies can improve efficiency, policies that directly affect the environmental externality have a much larger impact on both atmospheric temperature and economic welfare.     

中国低碳车辆技术现状与发展趋势

为探讨道路交通部门节能减排的决策依据,在总结低碳车辆技术主要种类基础上,重点评述了车辆动力系统和燃料替代技术的低碳化发展现状与趋势,包括全生命周期能效和温室气体排放情况。为进一步支持车辆技术低碳化,除加强综合节能技术和混合动力技术应用、电池技术升级和燃料电池技术研发之外,需加快生物燃料二代技术的研发进程和煤基燃料路线中二氧化碳捕获和封存技术等低碳技术的应用。     

Technology innovation and diffusion in “less than ideal” climate policies: An assessment with the WITCH model

This paper examines the dynamics of innovation in low-carbon energy technologies distinguishing between research and development and technology diffusion as a response to alternative climate policies. We assess the implications of second-best policies that depart from the assumption of immediate and global participation and of full technology availability. The analysis highlights the heterogeneous effects of climate policy on different energy R&D programs and discusses the contribution of important determinants such as carbon price and policy stringency, policy credibility, policy and technological spillovers and absorptive capacity.     

Multiple adaptation types with mitigation: A framework for policy analysis

Effective climate policy will consist of mitigation and adaptation implemented simultaneously in a policy portfolio to reduce the risks of climate change. Previous studies of the tradeoffs between mitigation and adaptation have implicitly framed the problem deterministically, choosing the optimal paths for all time. Because climate change is a long-term problem with significant uncertainties and opportunities to learn and revise, critical tradeoffs between mitigation and adaptation in the near-term have not been considered. We propose a new framework for considering the portfolio of mitigation and adaptation that explicitly treats the problem as a multi-stage decision under uncertainty. In this context, there are additional benefits to near-term investments if they reduce uncertainty and lead to improved future decisions. Two particular features are fundamental to understanding the relevant tradeoffs between mitigation and adaptation: (1) strategy dynamics over time in reducing climate damages, and (2) strategy dynamics under uncertainty and potential for learning. Our framework strengthens the argument for disaggregating adaption as has been proposed by others. We present three stylized classes of adaptation investment types as a conceptual framework: short-lived “flow” spending, committed “stock” investment, and lower capacity “option” stock with the capability of future upgrading. In the context of sequential decision under uncertainty, these subtypes of adaptation have important tradeoffs among them and with mitigation. We argue that given the large policy uncertainty that we face currently, explicitly considering adaptation “option” investments is a valuable component of a near-term policy response that can balance between the flexible flow and committed stock approaches, as it allows for the delay of costly stock investments while at the same time allowing for lower-cost risk management of future damages.     

Climate Strategy with Co2 Capture from the Air

It is physically possible to capture CO₂ directly from the air and immobilize it in geological structures. Air capture differs from conventional mitigation in three key aspects. First, it removes emissions from any part of the economy with equal ease or difficulty, so its cost provides an absolute cap on the cost of mitigation. Second, it permits reduction in concentrations faster than the natural carbon cycle: the effects of irreversibility are thus partly alleviated. Third, because it is weakly coupled to existing energy infrastructure, air capture may offer stronger economies of scale and smaller adjustment costs than the more conventional mitigation technologies. We assess the ultimate physical limits on the amount of energy and land required for air capture and describe two systems that might achieve air capture at prices under 200 and 500 $/tC using current technology. Like geoengineering, air capture limits the cost of a worst-case climate scenario. In an optimal sequential decision framework with uncertainty, existence of air capture decreases the need for near-term precautionary abatement. The long-term effect is the opposite; assuming that marginal costs of mitigation decrease with time while marginal climate change damages increase, then air capture increases long-run abatement. Air capture produces an environmental Kuznets curve, in which concentrations are returned to preindustrial levels.     

Engagement in the Third U.S. National Climate Assessment: commitment,capacity, and communication for impact

This paper examines the dynamics of energy investments and clean energy Research and Development (R&D) using a scenario-based modeling approach. Starting from the global scenarios proposed in the RoSE model ensemble experiment, we analyze the dynamics of investments under different assumptions regarding economic and population growth as well as availability of fossil fuel resources, in the absence of a climate policy. Our analysis indicates that economic growth and the speed of income convergence across countries matters for improvements in energy efficiency, both via dedicated R&D investments but mostly through capital-energy substitution. In contrast, fossil fuel prices, by changing the relative competitiveness of energy sources, create an economic opportunity for radical innovation in the energy sector. Indeed, our results suggest that fossil fuel availability is the key driver of investments in low carbon energy innovation. However, this innovation, by itself, is not sufficient to induce emission reductions compatible with climate stabilization objectives.     

Modeling endogenous learning and imperfect competition effects in climate change economics

In this two-part paper we evaluate the effect of “endogenizing” technological learning and strategic behavior of agents in economic models used to assess climate change policies. In the first part we show the potential impact of R&D policies or demonstration and deployment (D&D) programs in the context of stringent stabilization scenarios. In the second part we show how game-theoretic methods can be implemented in climate change economic models to take into account three types of strategic interactions: (i) the market power of the countries benefiting from very low abatement costs on international markets for CO₂ emissions, (ii) the strategic behavior of governments in the domestic allocation of CO₂ emissions quotas, and (iii) the non-cooperative behavior of countries and regions in the burden sharing of CO₂ concentration stabilization. The two topics of endogenous learning and game-theoretic approach to economic modeling are two manifestations of the need to take into account the strategic behavior of agents in the evaluation of climate change policies. In the first case an R&D policy or a demonstration and deployment (D&D) program are put in place in order to attain a cost reduction through the learning effect; in the second case the agents (countries) reply optimally to the actions decided by the other agents by exploiting their strategic advantages. Simulations based on integrated assessment models illustrate the approaches. These studies have been conducted under the Swiss NCCR-Climate program.     

Population, uncertainty, and learning in climate change decision analysis

The prospect of learning about various uncertainties relevant to analyses of the climate change issue is important because it can affect estimates of the costs of both damages and mitigation, and it can influence the optimal timing of emissions reductions. Baseline scenarios representing future emissions in the absence of mitigation are one of the major sources of uncertainty. Here we investigate how fast we might realistically expect to learn about the outlook for long-term population growth, as one determinant of future baseline emissions. That is, we estimate how long it might take to substantially revise current estimates of the likelihood of various population size outcomes over the twenty-first century. We draw on recent work showing that, because population growth is path dependent, we can learn about the long term outlook by waiting to observe how population changes in the short term. We then explore the implications of uncertainty and of this learning potential for mitigation costs and for optimal emissions. Using a simple model, we show that uncertainty in population growth translates into an uncertainty in the optimal tax rate of about $200/tC by 2050 for a range of stabilization levels. When learning is taken into account, it allows for mitigation strategies to change in response to new information, leading to a slight reduction in the expected value of mitigation costs, and a substantial reduction in the likelihood of high cost outcomes. We also find that while learning can lead to large revisions over the next few decades in anticipated population growth, this potential does not imply large changes in near-term optimal emissions reductions. Results suggest that further work on the potential for learning about other determinants of emissions could have larger effects on expected mitigation costs.     

Optimal carbon dioxide abatement and technological change: should emission taxes start high in order to spur R&;D?

Many European politicians argue that the EU should set tougher emission targets than what is required by the Kyoto protocol, and moreover, that emission trading with other countries outside EU should be limited so as to keep emission quota prices high. One of the arguments, frequently cited for such a policy, is the need for technological development. However, the literature on climate change and technological innovation does not unambiguously support the need for setting high emission taxes today. In this paper we investigate the relationship between emission taxes and technological change further by modeling innovation activity explicitly. In our model both the amount of R&D and the amount of carbon abatement are decided in a decentralized way by the market as a response to an emission tax. Moreover, we introduce several distinct failures in the market for new innovations, among others, insufficient patent protection and intertemporal knowledge spill-overs. Our findings suggest that governments should under some circumstances set a higher carbon tax today if we have technological change driven by R&D than if we have pure exogenous technological change. Based on numerical simulations these circumstances are (a) positive intertemporal knowledge spillovers and/or (b) weak patent protection.     

模糊理论在高校科技投入-产出决策中的应用

将模糊理论运用到高校科技投入-产出决策中,建立高校投入-产出决策模糊综合评价模型,并对我国31个地区2010年高校科技投入-产出决策进行实证分析.在模型中,将高校科技产出指标作为高校科技投入决策的评价指标,计算科技投入-产出决策的隶属度并进行排序.分析结果表明,高校R&D经费和人员投入水平高的地区,其隶属度越大,该地区的高校科技投入决策相对较优,而高校科技隶属度水平低的地区,经费投入是限制其发展的主要因素.     

Innovation benefits from nuclear phase-out: can they compensate the costs?

This paper investigates whether an inefficient allocation of abatement due to constraints on the use of currently available low carbon mitigation options can promote innovation in new technologies and have a positive impact on welfare. We focus on the case of a nuclear power phase-out and endogenous technical change in energy efficiency and alternative low carbon technologies. The research is inspired by the re-thinking about nuclear power deployment which took place in some countries, especially in Western Europe, after the Fukushima accident in March 2011. The analysis uses an Integrated Assessment Model, WITCH, which features multiple externalities related to greenhouse gas emissions and innovation market failures. Our results show that phasing out nuclear power stimulates R&D investments and deployment of technologies with large learning potential. The resulting technology benefits that would not otherwise occur due to intertemporal and international externalities almost completely offset the economic costs of foregoing nuclear power. The extent of technology benefits depends on the stringency of the climate policy and is distributed unevenly across countries.     

International Emission Trading and the Cost of Greenhouse Gas Emissions Mitigation and Sequestration

The deployment of carbon capture and sequestration (CC&S) technologies is greatly affected by the marginal cost of controlling carbon emissions (also the value of carbon, when emissions permits are traded). Both the severity and timing of emissions limitations and the degree to which emissions limitation obligations can be traded will affect the value of carbon and thereby the timing and magnitude of CC&S technology deployment. Emissions limits that are more stringent in the near term imply higher near-term carbon values and therefore encourage the local development and deployment of CC&S technologies.Trade in emissions obligations lowers the cost of meeting any regional or global emissions limit and so affects the rate of penetration of CC&S technologies. Trade lowers the marginal value of carbon and CC&S penetration in high cost regions and raises the marginal value of carbon and CC&S penetration in low cost regions. The net impact on the world CC&Stechnologies depends on whether their increased use in low-cost regions exceeds the reduced use in high-cost regions.In the long term, CC&S technologies must not only remove carbon but permanently sequester it. If reservoirs are not permanent, then the emissions and costs of control are merely displaced into the future. The paper presents quantitative estimates for the impacts of trade in emissions limitation obligations on the timing, magnitude, and geographic distribution of CC&S technologies and the marginal and total costs of carbon control.     

Economic consequences of the US withdrawal from the Kyoto/Bonn Protocol

Abstract

The US decision not to ratify the Kyoto Protocol and the recent outcomes of the Bonn and Marrakech Conferences of the Parties have important implications for both the effectiveness and the efficiency of future climate policies. Among these implications, those related with technical change and with the functioning of the international market for carbon emissions are particularly relevant, because these variables have the largest impact on the overall abatement cost to be borne by Annex B countries in the short and in the long run. This paper analyses the consequences of the US decision to withdraw from the Kyoto/Bonn Protocol both on technological innovation and on the price of emission permits (and, as a consequence, on abatement costs). In particular, the analysis highlights mechanisms and feedbacks related to technological innovation, technological spillovers and R&D which could be relevant and which modify some policy relevant conclusions. First, we identify two feedback effects which explain why our results lead to a less significant fall in the price of permits than in most empirical analyses recently circulated. We show that the US defection from the Kyoto Protocol, by inducing a decline in the demand and price of emission permits, lowers the incentives to undertake energy-saving R&D. As a consequence, emissions increase and feed back on the demand and supply of permits, thus implying a lower decline in the price of permits than previously estimated. At the same time, as a result of the reduced R&D investments and the augmented emissions, climate change damages intensify and require an increase in investments that are again coupled with a growth of emissions. By thus again increasing the demand for permits and reducing their supply, this effect enhances the previous mechanism. Notwithstanding the lower decline in the price of permits, the paper still identifies a smaller price than would occur with a US participation. Therefore, we emphasise in a second step the crucial role of Russia in climate negotiations due to a large increase in Russia's bargaining power.     

Economic consequences of the US withdrawal from the Kyoto/Bonn Protocol

The US decision not to ratify the Kyoto Protocol and the recent outcomes of the Bonn and Marrakech Conferences of the Parties have important implications for both the effectiveness and the efficiency of future climate policies. Among these implications, those related with technical change and with the functioning of the international market for carbon emissions are particularly relevant, because these variables have the largest impact on the overall abatement cost to be borne by Annex B countries in the short and in the long run. This paper analyses the consequences of the US decision to withdraw from the Kyoto/Bonn Protocol both on technological innovation and on the price of emission permits (and, as a consequence, on abatement costs). In particular, the analysis highlights mechanisms and feedbacks related to technological innovation, technological spillovers and R&D which could be relevant and which modify some policy relevant conclusions. First, we identify two feedback effects which explain why our results lead to a less significant fall in the price of permits than in most empirical analyses recently circulated. We show that the US defection from the Kyoto Protocol, by inducing a decline in the demand and price of emission permits, lowers the incentives to undertake energy-saving R&D. As a consequence, emissions increase and feed back on the demand and supply of permits, thus implying a lower decline in the price of permits than previously estimated. At the same time, as a result of the reduced R&D investments and the augmented emissions, climate change damages intensify and require an increase in investments that are again coupled with a growth of emissions. By thus again increasing the demand for permits and reducing their supply, this effect enhances the previous mechanism. Notwithstanding the lower decline in the price of permits, the paper still identifies a smaller price than would occur with a US participation. Therefore, we emphasise in a second step the crucial role of Russia in climate negotiations due to a large increase in Russia’s bargaining power.     

Health, Safety and Environmental Risks of Underground Co2 Storage – Overview of Mechanisms and Current Knowledge

CO₂ capture and storage (CCS) in geological reservoirs may be part of a strategy to reduce global anthropogenic CO₂ emissions. Insight in the risks associated with underground CO₂ storage is needed to ensure that it can be applied as safe and effective greenhouse mitigation option. This paper aims to give an overview of the current (gaps in) knowledge of risks associated with underground CO₂ storage and research areas that need to be addressed to increase our understanding in those risks. Risks caused by a failure in surface installations are understood and can be minimised by risk abatement technologies and safety measures. The risks caused by underground CO₂ storage (CO₂ and CH₄ leakage, seismicity, ground movement and brine displacement) are less well understood. Main R&D objective is to determine the processes controlling leakage through/along wells, faults and fractures to assess leakage rates and to assess the effects on (marine) ecosystems. Although R&D activities currently being undertaken are working on these issues, it is expected that further demonstration projects and experimental work is needed to provide data for more thorough risk assessment.     

Evaluating the US Mid-Century Strategy for Deep Decarbonization amidst early century uncertainty

The recent change in US presidential administrations has introduced significant uncertainty about both domestic and international policy support for continued reductions in GHG emissions. This brief analysis estimates the potential climate ramifications of changing US leadership, contrasting the Mid-Century Strategy for Deep Decarbonization (MCS) released under the Obama Administration, with campaign statements, early executive actions, and prevailing market conditions to estimate potential emission pathways under the Trump Administration. The analysis highlights areas where GHG reductions are less robust to changing policy conditions, and offers brief recommendations for addressing emissions in the interim. It specifically finds that continued reductions in the electricity sector are less vulnerable to changes in federal policy than those in the built environment and land use sectors. Given the long-lived nature of investments in these latter two sectors, however, opportunities for near-term climate action by willing cities, states, private landowners, and non-profit organizations warrant renewed attention in this time of climate uncertainty.

Key policy insights

• The recent US presidential election has already impacted mitigation goals and practices, injecting considerable uncertainty into domestic and international efforts to address climate change.

• A strategic assessment issued in the final days of the Obama Administration for how to reach long-term climate mitigation objectives provides a baseline from which to gauge potential changes under the Trump Administration.

• Though market trends may continue to foster emission declines in the energy sector, emission reductions in the land use sector and the built environment are subject to considerable uncertainty.

• Regardless of actions to scale back climate mitigation efforts, US emissions are likely to be flat in the coming years. Assuming that emissions remain constant under President Trump and that reductions resume afterwards to meet the Obama Administration mid-century targets in 2050, this near-term pause in reductions yields a difference in total emissions equivalent to 0.3–0.6 years of additional global greenhouse gas emissions, depending on the number of terms served by a Trump Administration.

     

Making sense of the politics in the climate change loss & damage debate

The Warsaw International Mechanism for Loss and Damage (L&D) associated with Climate Change Impacts (WIM) was established in 2013 to advance i) knowledge generation; ii) coordination and iii) support to address losses and damages under the UNFCCC. So far, the work undertaken by the WIM Executive Committee (ExCom) has focused on enhancing understanding and awareness of the issue and promoting collaboration with relevant stakeholders. Delivering on the WIM’s third function on action and support has lagged behind, and ‘the political’ nature of L&D has often been blamed for this. Key terrains of contention among Parties have included the positioning of L&D governance vis-à-vis the adaptation space and struggles around state liability and compensation. As a way to facilitate discussion on implementation options, recent research has suggested de-politicising aspects of the L&D debate; yet we have very little insight into how the politics are understood within the realm of international L&D governance. This paper brings an analysis of ‘the political’ into the picture by identifying the complex and underlying issues that fuel contention within UNFCCC L&D negotiations. It gives centre stage to the way different framings of norms and material interests affect the debate, and challenges the tendency in current L&D literature to overlook the socio-historical and political underpinnings of this area of policy-making. We employ a qualitative multi-methods research design which draws on content analysis of 138 official Parties’ submissions and statements, 14 elite interviews with key current and former L&D negotiators and is built on a foundation of 3 years of participant observation at COPs and WIM meetings. We approach this data with a political ethnographic sensibility that seeks to explore how meanings are constructed within and across different sources of data. Our empirical results show that, rather than being a monolithic dispute, L&D catalyses different yet intertwined unresolved discussions. We identify five areas of contention, including continued disputes around compensation; conflicts on the legitimacy of L&D as a third pillar of climate action; tensions between the technical and political dimension of the debate; debates over accountability for losses and damages incurred; and the connection of L&D with other unresolved issues under the Convention.