The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector

Jean-Francois Mercure (), Hector Pollitt, Unnada Chewpreecha (), Pablo Salas (), Aideen Foley (), Philip Holden () and Neil Edwards ()
Additional contact information
Unnada Chewpreecha: Cambridge Econometrics Ltd, Covent Garden, Cambridge, CB1 2HT, UK
Pablo Salas: Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge
Aideen Foley: Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge
Philip Holden: Environment, Earth and Ecosystems, Open University
Neil Edwards: Environment, Earth and Ecosystems, Open University

No 6, 4CMR Working Paper Series from University of Cambridge, Department of Land Economy, Cambridge Centre for Climate Change Mitigation Research

Abstract: This paper presents an analysis of possible uses of climate policy instruments for the decarbonisation of the global electricity sector in a non-equilibrium economic and technology innovation-diffusion perspective. Emissions reductions occur through changes in technology and energy consumption; in this context, investment decision-making opportunities occur periodically, which energy policy can incentivise in order to transform energy systems and meet reductions targets. Energy markets are driven by innovation, dynamic costs and technology diffusion; yet, the incumbent systems optimisation methodology in energy modelling does not address these aspects nor the effectiveness of policy onto decision-making since the dynamics modelled take their source from the top-down `social-planner' assumption. This leads to an underestimation of strong technology lock-ins in cost-optimal scenarios of technology. Breaking this tradition, our approach explores bottom-up investor dynamics led global diffusion of low carbon technology in connection to a highly disaggregated sectoral macroeconometric model of the global economy, FTT:Power-E3MG. A set of ten different projections to 2050 of the future global power sector in 21 regions based on different combinations of electricity policy instruments are modelled using this framework, with an analysis of their climate impacts. We show that in an environment emphasising diffusion and learning-by-doing, the impact of combinations of policies does not correspond to the sum of the impacts of individual instruments, but that strong synergies exist between policy schemes. We show that worldwide carbon pricing on its own is incapable of breaking the current fossil technology lock-in, but that under an elaborate set of policies, the global electricity sector can be decarbonised affordably by 89% by 2050 without early scrapping of capital.

Keywords: Transport; Technological change; Emissions; Fuel use (search for similar items in EconPapers)
JEL-codes: O33 Q41 Q42 Q48 Q54 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://be.4cmr.group.cam.ac.uk/working-papers/pdf/4cmr_WP_06.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ccc:wpaper:006

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