In this report, an impressive team of economists led by Jae Edmonds and Joe Roop explains how economic models of climate change take technological innovation into account. Much is known about how technological change has occurred in the past and what will drive it in the future. However, all projections require assumptions about the future role of technological change in the way the economy grows, in the way energy is used, and in the options available as alternatives to fossil fuels.
Technological progress reduces the cost of climate change mitigation.
This result is robust across a broad range of model types and assumptions. Significant technological progress occurs over long time horizons. This fact should be taken into account in establishing lead times for climate policies. Thus both policy-makers and businesses play a major role in fostering technological change. However, modeling this phenomenon is in its infancy.