Technology, Technical Change and Issues of the Scale of the New Energy Systems

Major technical advances, opening new energy options or lowering the cost of known ones, will be required if the world economy is to respond effectively to the climate change threat. Program research is devoted to improvement in quantification of the cost, efficiency, and environmental performance of technological alternatives for fossil fuel, industrial, and agricultural activities responsible for greenhouse gas emissions. windAlso included is investigation of the broader role of technical change and whether or how it might respond to climate policy. One focus of the research, for which the Joint Program is uniquely capable, is the environmental and resource consequences of scaling-up non-fossil technologies to the level needed to make a substantial contribution to future energy demand.

Technical change is one of the thorniest issues to investigate. If ever the taunt "if you are so smart why aren't you rich" was applicable, it is in the area of technical change. If we could know where the winners were, we should have our money and attention focused on them, rather than purporting to project future technologies and induced technical change. Where strong markets exist, they have been successful in encouraging investment in research and development and avoiding calamitous impacts of resource exhaustion. Repeated Malthusian projections of widespread famine have been avoided as agricultural productivity has increased at exponential rates. If only repeated concerns about the depletion of fossil fuels had come true we would not face the climate problems we have, because we would have been forced to transition away from them long ago.

Even though representing future technology is at best an educated guess, how they are represented in projections of the future are critical (Technology and technical change in the MIT EPPA model). If it is likely that advanced technology will be available in the future, it has important near-term consequences that aren't always obvious -- for a given target, economics suggest that if the low-cost options are ahead, we have more breathing room today than if the options are limited and more costly (U.S. greenhouse gas cap-and-trade proposals: Application of a forward-looking computable general equilibrium model; and Scenarios of greenhouse gas emissions and atmospheric concentrations). Can the market induce technical change? Almost certainly, and many attempts have been made to model the process.

An important element of modeling technical change is to model the market failures. New knowledge is a "public good" in the jargon of economics, meaning that once discovered, the knowledge can be used over and over again. The benefits of innovation spill over to sectors outside of their direct application. This means that efforts to protect intellectual property rights are generally incomplete, leading to the conclusion that as powerful as the market is in producing new technology, it could perhaps do much better if more of the rewards of innovation could be captured by inventors. At issue is whether and how technology policy can precisely direct R&D toward more climate-benign technologies and away from fossil-intensive technologies (Directed technical change and the adoption of CO2 abatement technology: The case of CO2 capture and storage; and Directed technical change and climate policy).

While discussion of technical change can, among economists, devolve into a rather obscure discourse -- on intellectual property, relative factor intensities, spillovers, and roles of Federal and private funding and conduct of research -- for most people technology involves hardware. Electric generation technology is at the heart of the climate issue because of the need for an alternative to conventional coal power generation. Various technologies exist for capturing CO2 released from power plants, and putting it in long-term storage underground or possibly in the ocean. What are their costs, and can they compete (Analysis of the coal sector under carbon constraints; and Future carbon regulations and current investments in alternative coal-fired power plant technologies; and Representing energy technologies in top-down economic models using bottom-up information)? How would a new generation of nuclear power plants compete (Assessment of U.S. cap-and-trade proposals)? Can solar and wind play a larger role, or do they have their own set of possible environmental consequences?

Equally as important, and perhaps even more challenging, is the transportation sector where good alternatives for gasoline or diesel vehicles have been elusive, suggesting that abatement in the sector is costly and limited. Are biofuels viable, or are the land-use implications potentially disastrous (Potential land use implications of a global biofuels industry)? Hydrogen vehicles offer a clean solution, but vehicle cost and producing the hydrogen in a way that does not lead to CO2 emissions, are significant barriers that must be overcome (Modeling the prospects for hydrogen powered transportation through 2100). Can we transition gradually from conventional vehicles to hybrids, plug-in hybrids, and eventually all electric vehicles, assuming we have a clean source of electricity.

A challenging aspect for technology is that the relatively cleaner fossil fuels are in short supply. This situation is likely to, if anything, force a move to heavier and dirtier fuels -- oil sands, oil shale, and coal liquids -- a trend we already observe (Heavier crude, changing demand for petroleum fuels, regional climate policy, and the location of upgrading capacity: A preliminary look). Investigating the implications of advanced conversion technologies is a key direction of the Program. Can the full fuel cycle produce low-carbon and low conventional-pollution technologies CO2 mitigation costs for Canada and the Alberta oil sands)? Does that mean electricity and electric vehicles, or clean or cleaner liquid, or gaseous fuels for vehicles.