Modelling Technical Change for Climate Policy Analysis - TechChange
FEEM research work on endogenous and climate policy induced technical change is organized around two main research lines. These investigate the issue of technical change under two different perspectives. The first one deals with the role of innovation in the energy sector, whereas the second research line focuses on the interactions between economic growth (at the macro level) and technical progress.
Energy innovation and the role of technical change in the energy sector obviously received increasing attention in the context of climate policy because they are key drivers to decouple economic growth from growing GHG emissions. Technical change also influences the macroeconomic performance of world economic systems and therefore affects mitigation strategies and the related costs. The energy sector is indeed part of a broader macroeconomic framework in which energy innovation and other types of innovation interact. For example, whether energy innovation crowds out other forms of knowledge or human capital investments can be investigated only in an integrated framework in which energy innovation coexists with other forms of endogenous technical change, such as labour or capital augmenting technical change.
Any attempt to model technical change dynamics is characterized by a large degree of uncertainty, essentially due to the unobservable nature of technical change. For this reason, research work on technical change at FEEM integrates modelling tools with empirical and econometric analyses. The latter are designed to provide empirically based models of endogenous technical change and energy innovation. This work is mostly based on patent and R&D data. Different formulations of technical change have been analysed to provide a very general and broad picture of the relationship between R&D expenditure and energy innovation.
Finally, the geographic dimension of technical change is also analyzed at FEEM, to understand the role of technological spillovers, of different technological capacities, and of asymmetric investment in R&D.