Targeted technology strategies for low-carbon economic growth: linking bottom-up and top-down assessments

Abstract

This chapter investigates the consequences of policies that attempt to mitigate greenhouse gas emissions without slowing the growth of the economy by improving energy efficiency in a set of target sectors. We develop a theoretical framework that unifies bottom-up marginal abatement cost curves, partial equilibrium techno-economic simulations, and analytical general equilibrium modeling. The framework is then applied to engineering assessments of energy efficiency technology deployments in Armenia and Georgia. Our results provide a practical demonstration of how to incorporate bottom-up technology detail on energy-efficiency improvements into an economic model that is simple and easily calibrated, but whose simulations throw into sharp relief the economy-wide opportunity costs and environmental benefits of technology deployment policies. The latter reveal how MAC curves can paint a misleading picture of the true potential for both abatement and economic growth when technological improvements operate within a system of general equilibrium interactions, but also highlight how the use of their underlying data to identify technology options with large investment elasticities of productivity improvement can lead to more accurate assessments of the economic consequences of low-carbon growth strategies. JEL classification: C68, Q48, Q54, Q55, Q65