A review of technical change in assessment of climate policy

Climate policy is often discussed as a lever with which to bring about climate-friendly technical innovation and diffusion. However, quantitative policy assessments routinely treat technological change as a factor that is independent of policy. Stabilizing atmospheric concentrations of CO2 cannot be achieved through marginal changes in the way we supply and use energy. The only path to stabilization of climate over the next century that is consistent with widely accepted population and economic-growth scenarios involves substantial decoupling of energy services from carbon emissions. The required rate of structural and technical change for such a goal has been experienced only in the wake of economic and resource crises and for periods of a decade or less. Historic rates of structural and technical change averaged over a century are far from adequate for stabilizing climate. In this paper, we review technical changes in the energy system and a few instances in which energy economic models have begun to include technical change as an endogenous feature of their assessments. Finally, we consider the implications of considering endogenous technical change for critical climate policy questions, such as the cost of control and the appropriate timing of the emissions mitigation effort.