Prospects for the Application of Energy Models in the Design of Climate Policies

Abstract

As the Kyoto Protocol comes into force, many countries are moving rapidly from an assessment of archetypical climate policies towards the design of sector specific policies and measures, their implementation, and appropriate monitoring. Experience from the European Union shows that in the phase of implementation, the need for dedicated sectoral models arises as the standard energy models. On the other hand, issues such as the international burden sharing for the second commitment period or a balancing of the global costs of emission mitigation and the costs of climate change, require a more integrated approach to modeling climate policies that will often require a hybridization of models. Under a study carried out for the German Environment Agency, analysis was carried out to determine which of the four basic energy model architectures, general equilibrium, input-output, energy system optimization, and simulation are particularly suited to address certain types of climate policy issues, and which structural characteristics or parameters can have critical influence on modeling results. As climate policy design moves towards domestic implementation, integration of multiple environmental objectives and international harmonization, the greatest demand is identified for new model developments at the extremes of sectoral policy assessment, through technology oriented simulation models, as well as more holistic ones (for example, integrated assessment models).