Modelling energy technology dynamics: methodology for adaptive expectations models with learning by doing and learning by searching

Abstract

This paper presents a module endogenising technical change which is capable of being attached to large scale energy models that follow an adaptive-expectations. The formulation includes, apart from the more classical learning by doing effects, quantitative relationships between technology performance and R&D expenditure. It even attempts to go further by partially endogenising the latter by incorporating an optimisation module describing private equipment manufacturers' R&D budget allocation in a context of risk and expectation. Having presented this module in abstract, the paper proceeds to describe how an operational version of it has been constructed and implemented inside a large-scale partial equilibrium world energy model (the POLES model). Concerning learning functions problems associated with the data are alluded to, the hybrid econometric methods used to estimate them are presented as well as the adjustments which had to be effected to ensure a smooth incorporation into the large model. In the final sections is explained the use of the model itself to generate partial foresight parameters for the determination of return expectations particularly in view of CO2 constraints and associated carbon values.

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