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Designing an Optimal 'Tech Fix' Path to Global Climate Stability: Integrated Dynamic Requirements Analysis for the 'Tech Fix'

Aug 2014
Working Paper
13-039
By  Paul A. David, Adriaan van Zon

Note: This paper has been superceded by the February 2015 version - SIEPR Discussion Paper 15-003

This paper analyzes the requirements for a social welfare-optimized transition path toward a carbon-free economy, focusing particularly on the deployment of low-carbon technologies, and the roles of engineering upgrading of extant facilities, and directed R&D to enhancing their productivity. The goal in each case is to achieve timely supply-side transformations in the global production regime that will avert catastrophic climate instability, and do so in a manner that minimizes the social welfare costs of stabilizing the level of the atmospheric concentration of greenhouse gases (GHG). This “planning-model” approach departs from conventional IAM exercises by dispensing with the need to make (generally dubious) assumptions about the macro-level consequences of behaviors of economic and political actors in response to market incentives and specific public policy instruments, such as a carbon tax. It shifts attention instead to the need for empirical research on critical technical parameters, and problems of inter-temporal coordination of investment and capacity utilization that will be required to achieve a timely, welfare-optimizing transition. A suite of heuristic integrated models is described, in which global macroeconomic growth is constrained by geophysical system with climate feedbacks, including extreme weather damages from global warming driven by greenhouse gas emissions, and the threshold level GHG concentration beyond which the climate system will be “tipped into” catastrophic runaway warming. A variety of technological options are identified, each comprising an array of specific techniques that share a distinctive instrumental role in controlling the concentration level of atmospheric CO2. The development of low-carbon technologies through investment in R&D, and their deployment embodied in new physical capital formation, is explicitly modeled; as is the implementation of known engineering techniques to “upgrade” existing fossil-fueled production facilities. The social-welfare efficient exercise of the available technological options is shown to involve sequencing different investment and production activities in separate temporal “phases” that together form a transition path to a sustainable low-carbon economy— one in which gross CO2-emissions do not exceed the Earth’s “natural” abatement capacity. Parametric variations of the “tipping point” constraint in these models will permit exploration of the corresponding modification in the required sequencing and durations of investment and production in the phases that form the optimal transition path. The preliminary solutions (using mufti-phase optimal control methods) expose important dynamic complementarities among technological options that are often presented as substitutes by current climate policy discussions.


JEL codes: Q540, Q550, O310, O320, O330

Keywords: global warming, tipping points, catastrophic climate instability, technology fix options, R&D investments, capital-embodied innovations, optimal sequencing, IAM and DIRAM policy design approaches, multi-phase optimal control, sustainable endogenous growth

Publication Keywords: 
paul david
paul a. david