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2012 -13 Seminars


Climate Change Energy Technology R&D Policy under Uncertainty

Erin Baker
Associate Professor of Industrial Engineering and Operations Research
University of Massachusetts, Amherst

Abstract
Human induced climate change is a major public policy problem today. One vexing problem faced by policy makers is how to allocate research budgets across a variety of energy technologies, in order to reduce the future costs of controlling climate change. We develop a framework that allows us to apply science to science policy, investigating energy technology R&D portfolio management in the face of climate change. We apply a multi-model approach, implementing probabilistic data derived from expert elicitations into a stochastic programming version of a dynamic integrated assessment model. We find that the optimal technology portfolio for the set of projects considered is fairly robust to different specifications of climate uncertainty, to different policy environments, and to assumptions about the opportunity cost of investing. We also conclude that policy makers would do better to over-invest in R&D rather than under-invest. Finally, we show that R&D can play different roles in different types of policy environments, sometimes leading primarily to cost reduction, other times leading to better environmental outcomes.