11.5.2 Effects of modelling sectoral technologies on estimated mitigation costs

The Energy Modelling Forum conducted a comparative study (EMF19) with the aim of determining how models for global climate change policy analyses represent current and potential future energy technologies, and technological change. The study assesses how assumptions about technology development – whether endogenous or exogenous – might affect estimates of aggregate costs for a 550 ppm CO₂ concentration stabilization target. The modellers emphasize the detailed representations for one or more technologies within integrated frameworks. Weyant (2004) summarizes the results, which indicate low GDP costs and a wide range of estimated carbon tax rates hinging on assumptions about baseline emission growth, as well as technology developments with regard to carbon capture, nuclear, renewables, and end-use efficiency. Figure 11.8 shows that the carbon tax rates are very low before 2050, with all models indicating values below about 14 US$/tCO₂ to 2030. Six of the nine models generate values below 27 US$/tCO₂ by 2050. By comparison, the EU ETS price of carbon reached nearly 35 US$/tCO₂ in August 2005 and again in April 2006.

Perhaps more revealing in the EMF-19 study are the specific features chosen by various modelling teams in their respective papers. Six teams focused on carbon capture and storage (Edmonds et al., 2004; Kurosawa, 2004; McFarland et al., 2004; Riahi et al., 2004; Sands, 2004; Smekens-Ramirez Morales, 2004), one on nuclear (Mori and Saito, 2004), one on renewables (van Vuuren et al., 2004), two on end-use efficiency (Akimoto et al., 2004; Hanson and Laitner, 2004), and one on an unspecified carbon-free technology (Manne and Richels, 2004). The impacts associated with varying technology assumptions within a given model ranged from a net economic gain, to substantial cuts in the cost of stabilization, to almost no effect on the cost of stabilization.

Figure 11.8: Carbon price projections for the 550 ppm CO₂-only stabilization scenario

Source: Weyant (2004).

Despite the wide range of results, they suggest some overarching conclusions (Weyant, 2004). First, technological development, however and under whatever policy it unfolds, is a (if not the) critical factor determining the long-term costs and benefits of mitigation. Second, there is no obvious silver bullet: a variety of technologies may be important depending on local circumstances in the future, and a portfolio of investments will be necessary to achieve significant mitigation at lower costs. Third, major technology shifts like carbon capture, advanced nuclear, and hydrogen require a long transition as learning-by-doing accumulates and markets expand so that they tend to play a more significant role in the second half of the century. By contrast, end-use efficiency may provide major opportunities in the shorter term.