{"title":"Optimal climate policy under exogenous and endogenous technical change: Making sense of the different approaches","authors":"Léo Coppens , Simon Dietz , Frank Venmans","doi":"10.1016/j.jeem.2025.103216","DOIUrl":null,"url":null,"abstract":"<div><div>We analyse the large and diverse literature on technical change in integrated assessment models (IAMs) of climate change, with a view to understanding how different representations of technical change affect optimal climate policy. We first solve an analytical IAM that features several models of technical change from the literature, including exogenous technical change in abatement technologies, exogenous decarbonisation of the economy, endogenous technical change via learning-by-doing, and endogenous technical change via R&D (in particular, directed technical change). We show how these models of technical change impact optimal carbon prices, emissions and temperatures in often quite different ways. We then survey how technical change is currently represented in the main quantitative IAMs used to inform policy, demonstrating that a range of approaches are used. Exogenous technical change in abatement technologies and learning-by-doing are most popular, although the latter mechanism is only partially endogenous in some models. We go on to quantify technical change in these policy models using structural estimation, and simulate our analytical IAM numerically, assessing the effect of technical change on optimal climate policy. We find large quantitative effects of technical change and large quantitative differences between different representations of technical change, both under cost-benefit and cost-effectiveness objectives.</div></div>","PeriodicalId":15763,"journal":{"name":"Journal of Environmental Economics and Management","volume":"133 ","pages":"Article 103216"},"PeriodicalIF":5.9000,"publicationDate":"2025-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Environmental Economics and Management","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0095069625001007","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
We analyse the large and diverse literature on technical change in integrated assessment models (IAMs) of climate change, with a view to understanding how different representations of technical change affect optimal climate policy. We first solve an analytical IAM that features several models of technical change from the literature, including exogenous technical change in abatement technologies, exogenous decarbonisation of the economy, endogenous technical change via learning-by-doing, and endogenous technical change via R&D (in particular, directed technical change). We show how these models of technical change impact optimal carbon prices, emissions and temperatures in often quite different ways. We then survey how technical change is currently represented in the main quantitative IAMs used to inform policy, demonstrating that a range of approaches are used. Exogenous technical change in abatement technologies and learning-by-doing are most popular, although the latter mechanism is only partially endogenous in some models. We go on to quantify technical change in these policy models using structural estimation, and simulate our analytical IAM numerically, assessing the effect of technical change on optimal climate policy. We find large quantitative effects of technical change and large quantitative differences between different representations of technical change, both under cost-benefit and cost-effectiveness objectives.
期刊介绍:
The Journal of Environmental Economics and Management publishes theoretical and empirical papers devoted to specific natural resources and environmental issues. For consideration, papers should (1) contain a substantial element embodying the linkage between economic systems and environmental and natural resources systems or (2) be of substantial importance in understanding the management and/or social control of the economy in its relations with the natural environment. Although the general orientation of the journal is toward economics, interdisciplinary papers by researchers in other fields of interest to resource and environmental economists will be welcomed.