Climate Change Policy Targets and the Role of Technological Change

In this paper, we present results of simulation experiments with the TIME-model on the issue of mitigation strategies with regard to greenhouse gases. The TIME-model is an integrated system dynamics world energy model that takes into account the fact that the system has an inbuilt inertia and endogenous learning-by-doing dynamics, besides the more common elements of price-induced demand response and fuel substitution. First, we present four scenarios to highlight the importance of assumptions on innovations in energy technology in assessing the extent to which CO2 emissions have to be reduced. The inertia of the energy system seems to make a rise of CO2 emissions in the short term almost unavoidable. It is concluded that for the population and economic growth assumptions of the IPCC IS92a scenario, only a combination of supply- and demand-side oriented technological innovations in combination with policy measures can bring the target of CO2-concentration stabilization at 550 ppmv by the year 2100 within reach. This will probably be associated with a temporary increase in the overall energy expenditures in the world economy. Postponing the policy measures will be more disadvantageous, and less innovation in energy technology will happen.