The Value of Itc Under Climate Stabilization

Abstract

We assess the effect of ITC in a global growth model, DEMETER-1CCS, with learning by doing where energy savings, an energy transition, and carbon capturing and sequestration (CCS) are the main options for emissions reductions. The model accounts for technology based on learning by doing embodied in capital installed in previous periods. We have run five scenarios, one baseline scenario in which climate change policy is assumed absent, and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emission reductions and the investment strategy is relatively independent of the endogeneity of technological change. The vintages structure of production is more important. But ITC reduces costs by about factor 2, though these benefits only materialize after some decades.

Keywords: Energy, Carbon taxes, Endogenous technological change, Niche markets

JEL Classification: Q43, Q54, Q55