sectoral economic costs and benefits of ghg mitigation - IPCC

Renewable Energy
From the point of view of the impacts of carbon constraints on energy technology development,
the main findings of the exercise described in this paper stand as follows:
- the Reference Case used as a benchmark in this study encompasses relatively high growth
and moderate oil and gas resources; the resulting picture is one of a world energy system
with a rapidly growing energy consumption in spite of significant efficiency improvements;
due to the increasing weight of emerging regions with large coal endowments and to
relatively high prices for oil and gas, coal is gaining market shares at world level; this is
largely due to developments in the electricity sector, where the “boom” in gas turbine
technologies is progressively superseded by the development of clean coal technologies,
while nuclear does not come out of its on-going structural crisis and the renewable’s share
remains limited;
- in the scenario combining a CO 2 stabilisation constraint between 2020-2030, and endogenous
treatment of technology dynamics, the picture for technology development at world level
may be significantly altered; carbon intensive technologies, such as clean coal technologies -
identified as the “winners” in the Reference - lose a large part of their potential markets and
thus improve less than anticipated; conversely the renewable technologies may experience,
either through the direct and indirect impacts of the carbon constraints, accelerated cost
reductions and market penetration; to a lesser extent these direct and indirect effects would
also benefit nuclear technologies, particularly of the new concept type, while the gas turbine
technology may be hardly affected;
- a third conclusion is not so much important for technology dynamics in themselves, but for
the assessment of CO 2 mitigation policies; the main consequence of accelerated
improvements in low carbon technologies, as described in the endogenous technology
framework - i.e., with R&D investment and learning functions - is a significant reduction in
the marginal and total abatement costs, as compared with results from exogenous technology
studies (including the earlier POLES studies).
The endogenous technology framework indeed provides an improved description of the complex
phenomena of technical change and thus introduces the possibility of more flexibility, more
pervasive diffusion of better technologies in the energy system. It thus lowers the estimate of the
abatement costs. This is probably the key insight from this research.
The POLES model results, with endogenous R&D investment and two-factor learning curves,
illustrate the functioning of the new model parts, giving qualitative insights about R&D and its
impacts under different sets of assumptions about GHG mitigation efforts. At the same time, we
want to add the caveat that quantitative policy recommendations cannot be made at this point
because the parameters and the formulae used need further investigation. Such work is underway
in the EC-supported SAPIENT project that involves largely the same research teams as the
TEEM Project repeatedly referred to in this report. The results provided here may thus be
improved in this new project by:
- detailed analyses of technology deployment in the different regions of the world and under
different CO 2 targets endowment and flexibility schemes;
- an improvement of the R&D data bases used for this study and more econometric studies of
two-factor learning curves (a concept which may also prove relevant for other researches in
similar or connected areas);
- more investigation on the different hypotheses used in this exercise and related for instance
to the “scrapping rate” of technological knowledge or to the “full spillover” of technological
progress in the world industry and across countries or regions.
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