ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization

Abstract

We assess the effect of ITC in a global growth model, - DEMETER-1CCS - with learning-by-doing, where energy savings, energy transition and carbon capturing and sequestration (CCS) are the three main options for emissions reductions. The model accounts for technological change based on learning by doing, embodied in capital installed in previous periods. We run five scenarios: one baseline scenario with no climate change policy and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emissions reductions and the investment strategy is relatively independent of the endogeneity of technological change. More important is the vintages’ structure of production. ITC does reduce costs by approximately a factor of 2, however, these benefits only materialize after some decades.