The Role of Technological Progress in Cost Estimates
Assumptions about energy technology play an important role in estimating mitigation costs. For example, many models assume that carbon capture and storage (CCS) will enable point sources of emission to capture the bulk of carbon emissions and store them with minimal leakage into the atmosphere over a long period. Some comparisons also assume that CCS will combine with large-scale bio-energy (“bio-CCS”), effectively generating “negative emissions” since biological fuels extract atmospheric carbon during growth. Such technology could facilitate reaching a longterm atmospheric concentration target despite relatively modest near-term mitigation efforts. However, the IPCC warns that “There is only limited evidence on the potential for large-scale deployment of [bio-CCS], large-scale afforestation, and other [CO2 removal] technologies and methods” (IPCC WG III AR5 2014). In addition, models must also specify the cost and timing of availability of such technology, potentially creating further variation in mitigation cost estimates.
The potential importance of technology, especially bio-CCS, is manifested in differences across models. Clarke et al. (2009) present delay cost estimates for 10 models simulating a 550 ppm CO2 equivalent target by 2100 allowing for overshoot. The three models that assume bio-CCS availability estimate global present values of the cost of delay ranging from $1.4 trillion to $4.7 trillion. Among the seven models without bio-CCS, four predict higher delay costs, one predicts that the concentration target was infeasible under a delay, and two predict lower delay costs. The importance of bio-CCS is even clearer with a more stringent target. For example, two of the three models with bio-CCS find that a 450 ppm CO2 equivalent target is feasible under a delay scenario, while none of the seven models without bio-CCS find the stringent target to be feasible.
The Department of Energy sponsors ongoing research on CCS for coal-fired power plants. As part of its nearly $6 billion commitment to clean coal technology, the Administration, partnered with industry, has already invested in four commercial-scale and 24 industrial-scale CCS projects that together will store more than 15 million metric tons of CO2 per year.
An important determinant of costs is the role of technological progress and the availability of mitigation technologies (see the box). The models typically assume technological progress in mitigation technology, which means that the cost of reducing emissions declines over time as energy technologies improve. As a result, it is cost-effective to start with a relatively less stringent policy, then increase stringency over time, and the models typically build in this cost-effective tradeoff. However, most models still find that immediate initiation of a less stringent policy followed by increasing stringency incurs lower costs than delaying policy entirely and then increasing stringency more rapidly.
We begin by characterizing the primary findings in the literature broadly, discussing the estimates of delay costs and how the costs vary based on key parameters of the policy scenarios; additional details can be found in the Appendix. We then turn to a statistical analysis of all the available
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