Threshold policy effects and directed technical change in energy innovation

This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country’s relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries.

Written by Lionel Nesta, Elena Verdolini and Francesco Vona

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Latest papers published by INNOPATHS

INNOPATHS is a four year EU funded research project that aims to work with key economic and societal actors to generate new, state-of-the-art low-carbon pathways for the European Union. Below is a round-up of the latest research to come from INNOPATHS.

Anadón, L.D., Baker, E., Bosetti, V. (2017) Integrating uncertainty into public energy research and development decisions, Nature 2, Article number: 17071 Free access

Geddes, A., Schmidt, T., Steffen, B. (2018) The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany, Energy Policy 115, 158–170 Free access

Steffen, B. (2018). The importance of project finance for renewable energy projects, Energy Economics 69, 280-294 post-print manuscript

Verdolini, E, Anadon, LD, Baker, ED, Bosetti, V, Reis, L. (2018) The future of energy technologies: an overview of expert elicitations.’ Review of Environmental Economics and Policy Free access

How much energy will buildings consume in 2100? A global perspective within a scenario framework

The demand for energy in buildings varies strongly across countries and climatic zones. These differences result from manifold factors, whose future evolution is uncertain. In order to assess buildings’ energy demand across the 21st century, we develop an energy demand model — EDGE — and apply it in an analytical scenario framework — the shared socio-economic pathways (SSPs) — to take socio-economic uncertainty into consideration. EDGE projects energy demand for five energy services, four fuel categories, and eleven regions covering the world.

The analysis shows that, without further climate policies, global final energy demand from buildings could increase from 116 EJ/yr in 2010 to a range of 120–378 EJ/yr in 2100. Our results show a paradigm shift in buildings’ energy demand: appliances, lighting and space cooling dominate demand, while the weight of space heating and cooking declines. The importance of developing countries increases and electricity becomes the main energy carrier.

Our results are of high relevance for climate mitigation studies as they create detailed baselines that define the mitigation challenge: the stress on the energy supply system stemming from buildings will grow, though mainly in the form of electricity for which a number of options to decrease GHG emissions exist.

Written by Antoine Levesque, Robert C. Pietzcker, Lavinia Baumstark, Simon De Stercke, Arnulf Grübler and Gunnar Luderer

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Future prospects for energy technologies: insights from expert elicitations

Expert elicitation is a structured approach for obtaining judgments from experts about items of interest to decision makers. This method has been increasingly applied in the energy domain to collect information on the future cost, technical performance, and associated uncertainty of specific energy technologies. This article has two main objectives: (1) to introduce the basics of expert elicitations, including their design and implementation, highlighting their advantages and disadvantages and their potential to inform policymaking and energy system decisions; and (2) to discuss and compare the results of a subset of the most recent expert elicitations on energy technologies, with a focus on future cost trajectories and implied cost reduction rates. We argue that the data on future energy costs provided by expert elicitations allows for more transparent and robust analyses that incorporate technical uncertainty, which can then be used to support the design and assessment of energy and climate change mitigation policies.

Written by Elena Verdolini, Laura Díaz Anadón, Erin Baker, Valentina Bosetti, and Lara Aleluia Reis

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