Abstract
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.
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Notes
The same analysis can be carried out by comparing the effect of convergence under the assumption of fast growth, namely BAU FS Gr versus BAU FS Gr SL Con.
R&D investments in the breakthrough technology are the same across the various scenarios with low oil because oil scarcity pushes the breakthrough technology to its upper bound. This model version features a deterministic representation of endogenous technical change. We assume that breakthrough innovations occurs if R&D investments are sufficiently high. The probabilistic nature of innovation is analyzed in Bosetti and Tavoni (2008).
Popp (2002) estimated a long-run elasticity of energy patenting with respect to energy prices of 0.354. He also concluded that energy prices can stimulate innovation pretty quickly. Newell et al. (1999) examined the extent to which the energy efficiency of the menu of home appliances available for sale changed in response to energy prices between 1958 and 1993. They found that the amount of innovation and energy efficiency improvement respond to changes in energy prices within a time framework of five years. By now a large number of papers also control for the inducement effect of some indicator of environmental policy or pollution expenditure, see Popp et al. (2009) for a review.
We talk about diffusion rather than invention because these technologies were invented in the 1950s and 1960s. A quick search for patent data using “horizontal drilling” and “hydraulic fracturing” as keywords, reveals that the 29 and 9 patents were granted under these keywords, respectively, between 1950 and 1960. Source: http://gb.espacenet.com/ viewed on December 30 2011.
Investments in hydropower are not discussed because they do no vary across scenarios.
CO2 fossil fuel emissions are considered.
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This work was funded by Stiftung Mercator www.stiftung-mercator.de
This article is part of a Special Issue on “The Impact of Economic Growth and Fossil Fuel Availability on Climate Protection” with Guest Editors Elmar Kriegler, Ottmar Edenhofer, Ioanna Mouratiadou, Gunnar Luderer, and Jae Edmonds.
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De Cian, E., Sferra, F. & Tavoni, M. The influence of economic growth, population, and fossil fuel scarcity on energy investments. Climatic Change 136, 39–55 (2016). https://doi.org/10.1007/s10584-013-0902-5
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DOI: https://doi.org/10.1007/s10584-013-0902-5