Multi-sectoral interactions in global energy end-use

This fellowship proposal is for the calculation of future scenarios of technological change and CO2 emissions in energy end-use, through the development of an interacting multi-sectoral family of theoretical and computational models of technology diffusion in energy end-use systems. The integration of this family of models into the Energy-Economy-Environment (E3) Model at the Global level (E3MG) will create the first global E3 model to consider simultaneously technology diffusion patterns, induced technological change in all sectors of energy use (transport, industry, end-use), natural resource constraints and the interaction between sectors.

The reduction of CO2 emissions requires changes of energy consuming technologies, such as vehicles for transport, lighting, heating and cooling systems, as well as industrial systems such as steel furnaces and aluminium smelters. Historically changes of technology occur gradually, following advances in engineering and production supply chains, but also through evolutions of habits and behaviours. Such historical diffusion patterns have been studied extensively using S-shaped curves [1], and it has been recognised that their inclusion in energy modelling is required in order to improve scenarios of future energy use, but they are challenging to implement and remain absent in current models [2]. Technology substitutions include for instance the replacement of petrol cars by electric vehicles or gas boilers by heat pumps, but also the replacement of one set of habits by another, such as switching from personal car use to public transport.

Individual emissions reduction measures have, when put in a multi-sectoral context, mutual synergies or they can be detrimental to one another, in terms of efficiency of energy use. The coordination of such measures is a complex problem that requires careful planning, and should ideally be based on analysing simultaneously the whole system of E3 interactions. For example, the calculation of global greenhouse gas emissions resulting from policies and economic scenarios involves a simultaneous study of emissions from all energy consumption and transformation sectors: power generation, industry, transport and end-use, driven by the demand for services or goods in these sectors.

The research proposed for this fellowship concerns firstly the development and integration of a complete family of new sub-models of technological change in energy end-use sectors into the existing Energy-Economy-Environment Model at the Global level (E3MG). E3MG is a large-scale macroeconometric model of the global economy, featuring 20 world regions and 42 industrial sectors. This work will use a new theoretical framework that was recently developed by myself for forecasting technological diffusion and learning-by-doing in competitive markets, which was successfully applied to construct a new sub-model for E3MG of the global power sector. The core of this project will involve using the combination of all models to generate UK and global future scenarios of technology and CO2 emissions, using external assumptions such as regulations, world population and land use. This will additionally enable fellow group members to explore macroeconomic impacts such as "green growth".

The work proposed will benefit from two-way interactions with a group of stakeholders at all stages of the project development. This will involve three main groups: applied economists at Cambridge Econometrics, environmental scientists of the Tyndall Centre at the University of East-Anglia and policy advisors and researchers at the UK Department for Energy and Climate Change and the UK Energy Research Centre. These groups will contribute by providing insight in bridging technology to the economy, contribute guidance on climate policy in the context of the UK's decarbonisation strategy and enable to explore environmental and human impacts associated with future CO2 emission.

The key impacts likely to result from this project concern UK and global evidence-based policy-making, providing a valuable contribution to the global knowledge pool upon which to ground decisions and improve the sustainability of global technology systems and economic development. Policy decisions however require public support, and thus an impact onto public understanding of the findings of this project is also sought.

The UK public sector will benefit directly from this research in its efforts to evaluate efficient greenhouse gas reduction pathways for its 2050 target, and in informing measures of reductions of energy consumption. Effectively, this will create the unique opportunity to study multi-sectoral interactions in energy consumption including technology diffusion and learning-by-doing concepts in all sectors of energy use, and changes in the efficiency of energy use generated by policy. This project will therefore provide a valuable contribution to the knowledge basis underlying CO2 emissions reduction measures in the UK, and could inform the 2050 pathways calculator of the Department of Energy and Climate Change (DECC) in parallel to other models. Additionally, in collaboration with economists at 4CMR and Cambridge Econometrics, this project will enable to generate important insights on employment and economic growth impacts of investments in green technology for the UK, so-called 'green growth', in an international context, a contribution that is likely to be unique. Co-benefits of this research will emerge through additional insights for UK energy security associated with decarbonisation strategies.

Internationally, the impacts on policy, likely to originate from this research will occur through improving the information supplied to climate change policy-makers. Three areas could benefit from this research. Firstly, it can contribute to improving the current work on the creation of efficient global pathways to CO2 emissions reductions for instance in developing countries and emerging economies, or evaluate the efficiency and effectiveness of existing policy decisions. Secondly, it can help determine strategies for reaching national energy security goals, in particular with respect to the transport sector and oil and gas supplies. Thirdly, in collaboration with other members of the Cambridge research group and with researchers in partner institutions such as the Tyndall Centre for Climate Change Research, it can contribute significantly to the demonstration the global economic benefits of certain CO2 emissions reduction pathways through green growth as well as the avoidance of climate impacts.

Contacts have been established with key science advisors at the UK Committee on Climate Change and the Department for Energy and Climate Change. Additional interactions will be sought with key policy-makers at various governmental institutions such as the Department for Transport (DfT), as well as with representatives of the industry. The particular actors targeted will vary during the length of this project as the focus evolves. In addition to the groups named above, collaborations are sought with other energy research groups nationally and internationally who could advise and benefit from the development of methodology and theory in this project, such as the UCL Energy Institute (MARKAL model) and the Grantham Institute for Climate Change. Contacts have been established with researchers at the International Institute for Applied Systems Analysis (MESSAGE model) and the Netherlands Environmental Assessment Agency (IMAGE model).

Direct public engagement and outreach activities will also be undertaken, detailed in the section Pathways to Impact. An emphasis will be given to communicating clearly the difficulties encountered in the coordination of emissions reduction measures, an aspect which has been poorly covered due to the lack of public or media understanding of these particular issues.