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The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector



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Mercure, JF 
Pollitt, H 
Chewpreecha, U 
Salas, P 
Foley, AM 


This paper presents an analysis of climate policy instruments for the decarbonisation of the global electricity sector in a non-equilibrium economic and technology diffusion perspective. Energy markets are driven by innovation, path-dependent technology choices and diffusion. However, conventional optimisation models lack detail on these aspects and have limited ability to address the effectiveness of policy interventions because they do not represent decision-making. As a result, known effects of technology lock-ins are liable to be underestimated. In contrast, our approach places investor decision-making at the core of the analysis and investigates how it drives the diffusion of low-carbon technology in a highly disaggregated, hybrid, global macroeconometric model, FTT:Power-E3MG. Ten scenarios to 2050 of the electricity sector in 21 regions exploring combinations of electricity policy instruments are analysed, including their climate impacts. We show that in a diffusion and path-dependent perspective, the impact of combinations of policies does not correspond to the sum of impacts of individual instruments: synergies exist between policy tools. We argue that the carbon price required to break the current fossil technology lock-in can be much lower when combined with other policies, and that a 90% decarbonisation of the electricity sector by 2050 is affordable without early scrapping.



Climate policy, Emissions reductions pathways, Climate change mitigation, Energy systems modelling

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Energy Policy

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Elsevier BV
Engineering and Physical Sciences Research Council (EP/K007254/1)
This work was supported by the Three Guineas Trust (A. M. Foley), Cambridge Econometrics (H. Pollitt and U. Chewpreecha), Conicyt (Comisión Nacional de Investigación Científica y Tecnológica, Gobierno de Chile) and the Ministerio de Energía, Gobierno de Chile (P. Salas), the EU Seventh Framework Programme grant agreement No 265170 ‘ER-MITAGE’ (N. Edwards and P. Holden) and the UK Engineering and Physical Sciences Research Council, fellowship number EP/K007254/1 (J.-F. Mercure).