The effectivity of technological innovation on mitigating the consequences of climate change policies

Which conditions should technological change in the energy sectors fulfil in order to accomplish certain emission objectives. Increased emissions cause an increase in mean global temperature which is a major cause for the changes in mortality and birth rates, and increases health risks. This paper considers an objective of limiting the rise in mean global temperature to 0.1 degree Celcius less than under a Businessas-Usual scenario in 2050. The integrated assessment model WIAGEM explains energy productivity in a production sector as determined by the sector’s outlays on research and development in the recent past. The impact of investments in research and development on energy productivity depends on an efficiency parameter and an elasticity parameter. The efficiency parameter and elasticity parameter are calibrated in such a way that a temperature objective is met. We define two counterfactual scenarios. One scenario limits technological innovation to the developed regions where the value of the efficiency parameters in these regions are determined such that the temperature objective is met. Another scenario extends this scenario to the incorporation of the developing world where the elasticity parameter in these regions are determined such that the temperature objective is met. We use the ’World Integrated Assessment General Equilibrium Model’ (WIAGEM) which combines an economic general equilibrium model based on the MultiSector-MultiRegional-Trade (MS-MRT) model with a climate model and a damage assessment model. WIAGEM is an intertemporal recursive dynamic general equilibrium model with a time horizon. The time span is from 1995 until 2050 in time steps of 5 years.