Developing the PAGE2002 Model with Endogenous Technical Change

Abstract

Presented research demonstrates the inclusion of endogenous technical change into the PAGE2002 integrated assessment model of climate change. The ‘experience curve’ or learning-by-doing concept, made popular by the Boston Consulting Group during the 1960’s provides a mechanism with which to describe cost reduction through experiential learning. The implementation of learning requires both a restructuring of the way costs are modelled as well as the inclusion of an explicit learning function with initial abatement costs and learning coefficients calibrated to historical renewable energy data. The discounted values for total abatement costs are calculated for both the standard PAGE2002 model without an explicit learning function and the modified PAGE2002 model. The results were found to be of a similar magnitude, partially due to the myopic effects of discounting, though the result was found to be highly sensitive to the learning rate used, which in our case was a conservative estimate.