Technological change across sectors

A major development since the TAR has been the inclusion in many top-down models of endogenous technological change. Using different approaches, modelling studies suggest that allowing for endogenous technological change may lead to substantial reductions in carbon prices as well as GDP costs, compared with most of the models in use at the time of the TAR (when technological change was assumed to be included in the baseline and largely independent of mitigation policies and action). Studies without induced technological change show that carbon prices rising to 20 to 80 US$/tCO₂-eq by 2030 and 30 to 155 US$/tCO₂-eq by 2050 are consistent with stabilization at around 550 ppm CO₂-eq by 2100. For the same stabilization level, studies since TAR that take into account induced technological change lower these price ranges to 5 to 65 US$/tCO₂eq in 2030 and 15 to 130 US$/tCO₂-eq in 2050. The degree to which costs are reduced hinges critically on the assumptions about the returns from climate change mitigation R&D expenditures, spill-overs between sectors and regions, crowding-out of other R&D, and, in models including learning-by-doing, learning rates (high agreement, much evidence) [11.5].

Major technological shifts like carbon capture and storage, advanced renewables, advanced nuclear and hydrogen require a long transition as learning-by-doing accumulates and markets expand. Improvement of end-use efficiency therefore offers more important opportunities in the short term. This is illustrated by the relatively high share of the buildings and industry sector in the 2030 potentials (Table TS.17). Other options and sectors may play a more significant role in the second half of the century (see Chapter 3) (high agreement, much evidence) [11.6].