energy efficiency and the cost of ghg abatement a comparison of bottom up and hybrid models for the us a highly influential report by the mckinsey consulting firm suggests that a large potential for profitable energy efficiency exists in the us and that substantial greenhouse gas emissions reductions can therefore be achieved at a low cost this result is consistent with other studies conducted using a bottom up methodology that dates back to the work of lovins beginning in the 1970s research over the past two decades however has identified shortcomings with the conventional bottom up approach and this has led to the development of new analytical frameworks that are referred to as hybrid energy economy models using the cims hybrid model we conducted simulations for comparison with the mckinsey results these exercises suggest a more modest potential to reduce greenhouse gas emissions at a given marginal cost as well as a smaller contribution from energy efficiency relative to other abatement opportunities such as fuel switching and carbon capture and storage hybrid models incorporate parameters reflecting risk and quality into their estimates of technology costs and our analysis suggests that these play a significant role in explaining differences in the results

no free ride to zero emissions simulating a region s need to implement its own zero emissions vehicle zev mandate to achieve 2050 ghg targets abstract the adoption of zero emission vehicles zevs is limited by a variety of barriers some are region specific e g availability of charging infrastructure while others are global in nature e g battery prices where improvements spill over between regions this study explores regional spillover effects and ghg impacts of strong zev focused policy specifically the zev mandate in place in ten u s states zev states which requires automakers to sell a minimum amount of zevs each year we use a dynamic technology adoption model to simulate passenger vehicle sectors in north america focusing on the case of one small region british columbia covering 0 7 of the market as potentially free riding off of zev states policy covering 23 of the market results indicate that free ridership is not effective even with the zev mandate driving very high sales in zev states british columbia cannot achieve significant zev adoption without also implementing its own zev mandate further for british columbia to meet its 2050 ghg targets it may need a zev mandate in addition to complementary climate policies pushing zevs to account for 40 93 of new vehicle sales in 2050 in short regions seeking low carbon transportation likely need to implement their own stringent policies

estimating aggregate automotive income elasticities from the population income share elasticity the conventional approach to estimating the income responsiveness of a product s sales involves collecting data on sales as a function of income and product prices and then estimating a demand model in many cases it is very difficult to either collect the required data or reliably estimate the demand model this article develops an alternative approach toward estimating these income responsiveness parameters using only the average income of the product s buyers and the population income distribution we illustrate our technique with automotive data and obtain fairly intuitive results

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

the cyclical behavior of prices abstract the procyclical behavior of prices has been a staple of business cycle lore since the work of the early nber business cycle researchers this paper reexamines that empirical fact the aggregate data do not support procyclical price movements as a stable feature of the business cycle the only episode where it is a robust feature of the data is the period between the two world wars particularly the period of the great depression

legitimizing research technology and innovation policies for transformative change combining insights from innovation systems and multi level perspective in a comprehensive failures framework abstract the recent policy debates about orientating research technology and innovation policy towards societal challenges rather than economic growth objectives only call for new lines of argumentation to systematically legitimize policy interventions while the multi level perspective on long term transitions has attracted quite some interest over the past years as a framework for dealing with long term processes of transformative change but the innovation systems approach is still the dominant perspective for devising innovation policy innovation systems approaches stress the importance of improving innovation capabilities of firms and the institutional settings to support them but they are less suited for dealing with the strategic challenges of transforming systems of innovation production and consumption and thus with long term challenges such as climate change or resource depletion it is therefore suggested to consider insights from transition studies more prominently in a policy framework that is based on the innovation systems approach and the associated notion of failures we propose a comprehensive framework that allows legitimizing and devising policies for transformative change that draws on a combination of market failures structural system failures and transformational system failures

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

picking winners modelling the costs of technology specific climate policy in the u s passenger vehicle sector abstract researchers debate the cost effectiveness of technology specific versus technology neutral climate policies but few quantify the differences using the case of low carbon vehicle technologies in the us passenger vehicle sector ethanol plug in electric and hydrogen we develop a technology adoption simulation model that represents increasing returns to adoption in both financial costs and consumer preferences representing uncertainty through monte carlo analysis we compare the policy costs tonne co2 out to 2050 of i a technology neutral carbon tax ii a somewhat neutral vehicle standard requiring low carbon vehicle sales but allowing competition among technologies and iii technology specific vehicle standards requiring sales of just one technology on average across simulations the carbon tax is twice as cost effective as the best vehicle standard in part because the tax more substantially affects vehicle use rates among the vehicle standards a technology specific standard that selects the right winner plug in electric vehicles is more cost effective than the neutral standard as it more quickly stimulates technology improvement however there is risk in a technology specific approach mistakenly forcing a loser technology hydrogen results in policy costs that are 2 to 5 times higher than other policies results can help policymakers trade off the costs and risks of different climate policy options

implications of delaying transport decarbonisation in the eu a systems analysis using the primes model abstract the transport sector decarbonisation represents an essential part of the ghg emissions reduction strategy of the eu for the 2030 and 2050 horizon the strategy presumes a far reaching structural system change towards the marketing of advanced electrified powertrains and use of energy carriers such as electricity and hydrogen that are generated in a carbon free way the decade 2020 2030 is expected to set in motion the complex process of the necessary transformation of the power generation and transport systems which mandates the successful coordination of the interrelated market actors consumers and policy makers this paper presents a systems analysis that aims to assess what would happen if the decarbonisation strategy fails to develop as anticipated during the decade 2020 2030 we refer to this timeframe as the lost decade to answer this question our analysis is based on counterfactual scenarios quantified using the primes energy systems model the analysis concludes that the decade 2020 2030 is a critical point in this transformation limited progress in the coming decade would require the adoption of stringent policy measures beyond 2030 which along with the pressure to reduce emissions in a short period are found to increase substantially the total costs of the system

a policy approach to the environmental impacts of technological lock in abstract the broadening spectrum of environmental problems the uncertainty regarding their scale and duration and their possible irreversibility in the context of the growing social preference for environmental quality make it necessary to undertake an ex ante approach to the link between productive activity and environmental quality this link lies in technology and the right approach is to understand how the process of technological change can lead towards sustainability the added value of evolutionary economics in the context of environmental policy resides mainly in the fact that it warns that certain inferior environmental technologies may be locked in to the economic system the results of our model show that it would be advisable to undertake policies expressly aimed at the process of sustainable technological change applying an ex ante precautionary approach in a way that is complementary to the conventional equilibrium oriented environmental policies the nature of these policies and how they might be implemented are questions we will address from this novel approach to the concept of sustainable development in short the main objectives of this paper are to understand more fully the dynamics of the process of technological change its role in sustainable development and to assess the implications of this dynamic approach to techno environmental policy to achieve these goals we have developed an agent based model abm using distributed artificial intelligence dai concepts drawn from the general methodology of social simulation

a review of uncertainties in technology experience curves abstract the use of log linear experience curves or learning curves relating reductions in the unit cost of technologies to their cumulative production or installed capacity has become a common method of representing endogenous technical change in energy economic models used for policy analysis yet there are significant uncertainties in such formulations whose impact on key model results have been insufficiently examined or considered this paper reviews the major types of uncertainty in log linear experience curves and their effect on projected rates of cost reduction uncertainties are found not only in the learning rate parameter of a log linear model but also in the functional form that determines the shape of an experience curve evidence for alternative forms such as an s shaped curve is reviewed along with case studies that demonstrate the uncertainties associated with cost increases during early commercialization of a technology a phenomena that is widely recognized but rarely quantified or incorporated in learning models additional factors discussed include the effects of learning discontinuities institutional forgetting and the influence of social economic and political factors we then review other models of causality which aim to improve modelers ability to explain and predict the influence of other underlying processes that contribute to technology cost reductions in addition to learning ignoring other types of underlying mechanisms can create a false sense of precision and overestimate the true contribution of learning currently however uncertainties in such multi factor models remain large due to the difficulties of estimating key parameters such as private sector r d investments and extending models of a specific technology to a broader suite of technologies and cost projections pending the development and validation of more robust models of technological change we suggest ways to significantly improve the characterization and reporting of current learning model uncertainties and their impacts on the results of energy economic models to help reduce the potential for drawing inappropriate or erroneous policy conclusions

cheap talk with two senders and complementary information this paper studies a cheap talk model with two senders having partial and non overlapping private information communicating with an uninformed receiver the two senders private information is complementary in the sense that the marginal impact of one sender s private information on the receiver s ideal action depends on the other sender s private information when the two senders communicate simultaneously their information transmission exhibits strategic complementarity more information transmitted by one sender leads to more information transmitted by the other sender when the two senders have like biases it is always optimal for the receiver to delegate the decision rights to the sender with a smaller bias when two senders have opposing biases simultaneous communication is more likely to dominate delegation

market price and income elasticities of new vehicles demand recent evidence from aggregate models of automobile demand indicates that when not corrected for quality differences market price elasticity of demand is substantially biased downwards this note presents new information on market price and income elasticities derived from a disaggregate demand model that controls for cost household income vehicle attributes and perceived quality consumer search and manufacturer based on an extensive household survey of new vehicle purchasers in 1989 market price and income elasticities are estimated to be 0 87 and 1 70 respectively moreover excluding vehicle quality from a well specified model is found to have little effect upon the estimated market elasticities copyright 1996 by mit press

prices output and hours an empirical analysis based on a sticky price model abstract i show that a simple sticky price model based on rotemberg 1982 is consistent with a variety of facts concerning the correlation of prices hours and output it is consistent with the negative correlation between forecastable movements in prices and output as well as the smaller negative correlation between forecastable movements in prices and hours it is also consistent with the positive correlations of unexpected movements in prices output and hours these patterns are harder to reconcile with the flexible price version of the model in particular they require that money respond differently to forecastable and to unforecastable real shocks

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

real business cycles a new keynesian perspective the debate over the source and propagation of economic fluctuations rages as fiercely today as it did 50 years ago in the aftermath of keynes s the general theory and in the midst of the great depression today as then there are two schools of thought the classical school emphasizes the optimization of private economic actors the adjustment of relative prices to equate supply and demand and the efficiency of unfettered markets the keynesian school believes that understanding economic fluctuations requires not just studying the intricacies of general equilibrium but also appreciating the possibility of market failure on a grand scale

improving behavioral realism in hybrid energy economy models using discrete choice studies of personal transportation decisions hybrid energy economy models combine top down and bottom up approaches to explore behaviorally realistic responses to technology focused policies this research uses empirically derived discrete choice models to inform key behavioral parameters in cims a hybrid model the discrete choice models are estimated for vehicle and commuting decisions from a survey of 1150 canadians with the choice models integrated into cims we simulate carbon taxes gasoline vehicle disincentives and single occupancy vehicle disincentives to show how different policy levers can motivate technological change we also use the empirical basis for the choice models to portray uncertainty in technological change costs and emissions

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

the comovement between output and prices abstract in this paper i analyze the comovement of us prices and output in the postwar period i use a new set of statistics to characterize the comovement between variables the statistics capture important information about the dynamics in the system the estimation procedure does not require assumptions about the order of integration or the types of assumptions needed for var decompositions i find that the comovement between output and prices is positive in the short run and negative in the long run i show that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain these empirical results while sticky price models with only demand shocks cannot

energy environment policy modeling of endogenous technological change with personal vehicles combining top down and bottom up methods abstract the transportation sector offers substantial potential for greenhouse gas ghg emission abatement but widely divergent cost estimates complicate policy making energy economy policy modelers apply top down and bottom up cost definitions and different assumptions about future technologies and the preferences of firms and households our hybrid energy economy policy model is technology rich like a bottom up model but has empirically estimated behavioral parameters for risk and technology preferences like a top down model unlike typical top down models however it simulates technological change endogenously with functions that relate the financial costs of technologies to cumulative production and adjust technology preferences as market shares change we apply it to the choice of personal vehicles to indicate first the effect on cost estimates of divergent cost definitions and second the possible response to policies that require a minimum market share for low emission vehicles

the cyclical behavior of prices interpreting the evidence previous studies of the cyclical behavior of prices have found that the cross correlations between output and prices in post wwii u s data are generally negative these correlations h have been interpreted as being more consistent with supply driven models of business cycle fluctuations than with models that focus on demand shocks in this paper the authors show that the signs of price output correlations provide little information about the underlying shock for instance a simple keynesian model driven by demand shocks leads to negative correlations between these variables the authors results suggest that price output correlations may not be a particularly useful way to characterize the cyclical behavior of prices copyright 1995 by ohio state university press

when does coordination require centralization corrigendum the equations on page 153 of when does coordination require centralization which appeared in the march 2008 issue of the american economic review failed to print in their entirety the complete text of section iii decision making appears below

the neighbor effect simulating dynamics in consumer preferences for new vehicle technologies abstract understanding consumer behaviour is essential in designing policies that efficiently increase the uptake of clean technologies over the long run expert opinion or qualitative market analyses have tended to be the sources of this information however greater scrutiny on governments increasingly demands the use of reliable and credible evidence to support policy decisions while discrete choice research and modeling techniques have been applied to estimate consumer preferences for technologies these methods often assume static preferences this study builds on the application of discrete choice research and modeling to capture dynamics in consumer preferences we estimate canadians preferences for new vehicle technologies under different market assumptions using responses from two national surveys focused on hybrid gas electric vehicles and hydrogen fuel cell vehicles the results support the relevance of a range of vehicle attributes beyond the purchase price in shaping consumer preferences towards clean vehicle technologies they also corroborate our hypothesis that the degree of market penetration of clean vehicle technologies is an influence on people s preferences the neighbor effect finally our results provide behavioural parameters for the energy economy model cims which we use here to show the importance of including consumer preference dynamics when setting policies to encourage the uptake of clean technologies

a tale of two market failures technology and environmental policy abstract market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies these combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives and can be cost effectively harnessed through the use of economic incentive based policy in the presence of weak or nonexistent environmental policies investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable positive knowledge and adoption spillovers and information problems can further weaken innovation incentives while environmental technology policy is fraught with difficulties a long term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success

optimal limited authority for principal abstract this article studies a principal agent problem where the only commitment for the uninformed principal is to restrict the set of decisions she makes following a report by the informed agent we show that an ex ante optimal equilibrium for the principal corresponds to a finite partition of the state space and each retained decision is ex post suboptimal for the principal biased toward the agent s preference generally an optimal equilibrium does not maximize the number of decisions the principal can credibly retain compared to no commitment limited authority improves the quality of communication from the agent as a result it can give the principal a higher expected payoff than delegating the decision to the agent

value of technology in the u s electric power sector impacts of full portfolios and technological change on the costs of meeting decarbonization goals abstract power sector decarbonization is an important pillar of climate mitigation efforts but perspectives differ about the relative competitiveness of generation technologies and how limited portfolio approaches e g where non renewable generation options are prohibited could alter the costs and likelihoods of reaching emissions reduction goals the existing literature on impacts of technological availability and cost on electric sector planning typically use models that do not have sufficient technological spatial and temporal detail to adequately resolve the economic competitiveness of variable renewable energy vis a vis dispatchable generators using a state of the art energy economic model this work examines impacts of technological availability and advanced generation technologies on u s electricity market outcomes across a range of regional market and policy contexts we show that decarbonization costs are 11 76 higher as technological options are removed from consideration incremental compliance costs for a 95 co2 reduction below 2005 levels are roughly twice as high when new nuclear carbon capture equipped units and transmission are not allowed however the economic and technical implications of limited portfolios depend on the market and policy contexts e g costs are higher with stringent targets more extensive end use electrification and lower gas prices and the costs and capabilities of the remaining options the analysis demonstrates how lower temporal and spatial resolution models likely understate the value of technology by omitting key economic and technical features of high variable renewable pathways additionally the analysis quantifies how technological change can lower costs of emissions reductions by 7 73 and how low cost battery storage can provide a hedge against higher costs when technological portfolios are limited