New Econometric Model for Environmental Strategies. Implementation for Sustainable Development / Endogenous Technical Change – NEMESIS/ETC
The project intends to assess the socio-economic impacts of technological change in energy systems induced by enhanced research activities and environmental policies. The study is based both on a generic technology assessment approach and global system analysis.
Recent results of theoretical and empirical modelling suggest that recognising the endogenous nature of technological change (ETC) modifies the impact on both environment and economy of environmental policies. With an analysis of ETC a new perspective is given on the potential importance of environmental policy instruments. Models with ETC have only recently emerged as the appropriate way to address sustainability questions; for this reason they require major developments to allow for a proper analysis of environmental policies and technological transitions. In fact, the aim of the NEMESIS-ETC project is to develop new insights for technological change in different families of applied models: econometric, general equilibrium and techno-economic ones.
Started in February 2002, the project will use different approaches in order to develop insights into how to realise technological transformation towards non carbon emitting production and growth: endogenous technical progress in econometric models, in applied general equilibrium ones, and bottom up technological approach. The Centrale Recherche S.A/ Lab ERASME (France) co-ordinates the activity of other seven partners. In particular, FEEM will take active part to three work packages, and will be responsible of the one labelled ‘Policy Instruments’. FEEM will be engaged in the simulations of various policy scenarios (e.g. Business-As-Usual, Kyoto Forever, Bush Forever) in order to provide the European Commission with insights on the relationship between the political environmental constraints and incentives to undertake environmental and non environmental R&D. Moreover, the role of environmental taxes and/or emissions trading will be part of our analysis.
As a project under "RTD Activities of a Generic Nature", the aim is to develop an analysis that allows for an assessment of the socio-economic impact of technological change in energy systems induced by enhanced research activities and environmental policies. The study is based both on a generic technology assessment approach and a global systems analysis, as under Key Action 6 of the Work Programme. Economy-environment-energy (E3) models are developed to analyse the technological innovation regarding non-carbon emitting energy sources. The objective is to develop short-, medium- and long-term strategies and scenarios on supply and demand technologies that promote an environmentally beneficent use of energy, and the introduction of new energy technologies that can contribute to mitigating global warming.
The innovative aspects can be presented in the following ideas:
FEEM is engaged in three work packages centred on the role of technical change in 3E models. The work packages are:
- Model Comparison: detailed model comparison and analysis of the robustness of policy recommendations. Study of the role of ETC in designing environmental policy instruments. Development of economic models with ETC and an analysis of technological and industrial transitions, in order to address how to establish sustainability in the energy supply sector.
- Policy Instruments: the policy instruments are analysed that steer energy technology in particular directions. An analysis of ETC that formulates the potential importance of environmental policy instruments will be undertaken. Feedback is given for scenario comparisons developed under the previous work package and for the policy analysis of the following one. The models with ETC are refined and used for an elaborated analysis of the environmental policies and technological transitions required to address climate change. Quantitative results are reported on how a number of today’s sustainability questions in the energy sector could be addressed.
- Policy Analysis: the major goal is to provide lessons for policy making on promoting (renewable) technologies that do not emit carbon dioxide. The findings of the collaborators are compared, and an analysis is made of the agreements found between the modelling results, as well as possible disagreements. Recommendations are made for policy making on the potential importance of environmental policy instruments and the role of induced technological change in efforts to find solutions contributing to addressing global warming and the necessary industrial transformation of energy production.