​Technology Choice Model for Climate Policy Assessment

Climate policies are commonly evaluated using aggregated economic models such as computational general equilibrium models. These models show the effects of climate policies on the whole economy or specific sectors, but do not... [ view full abstract ]

Climate policies are commonly evaluated using aggregated economic models such as computational general equilibrium models. These models show the effects of climate policies on the whole economy or specific sectors, but do not provide insights into changes in technology mixes used for the production of individual products. In this work, we therefore propose a new approach for modeling the effect of climate policies on technology choices. The proposed approach is based on the Technology Choice Model (TCM)¹ which we recently introduced as modeling framework for Consequential Life Cycle Assessment. In TCM, products can be produced by more than one technology. Technology mixes are determined by a cost minimization objective, taking into account constraints in factor availability and parameter uncertainties. The cost minimization objective allows capturing the impact of climate policies on the technology mix by the suggested TCM approach.

In a hypothetical case study, we demonstrate for the production of biofuels and corn that the model is able to determine changes in technology mixes, product prices, market volumes, and factor rents in response to the introduction of an emissions trading scheme. We further show the interdependence between the market volumes and prices of fuel and corn, and discuss their impact on land use and climate. The case study results in a non-linear relationship between potential climate impact reductions and the price of emissions certificates within the emissions trading scheme.

Reference:

¹ Kätelhön, A.; Bardow, A.; Suh, S. Stochastic Technology Choice Model for Consequential Life Cycle Assessment. Environ. Sci. Technol. 2016, 50 (23), 12575–12583; DOI 10.1021/acs.est.6b04270.