The Value of Technological Advance in Decarbonizing the U.S. Economy

Abstract

This paper examines the role of technology in managing the costs of a carbon constraint on the U.S. economy. Two portfolios of technology are examined. One reflects modest investments in climate-friendly technologies, the other more aggressive development. The analysis indicates that the development of a broad range of low-to zero-carbon emitting technologies can substantially reduce (but not eliminate) the economic cost of decarbonization. By enabling large-scale emissions reductions on the supply-side, costly reductions in demand for high-value energy services are avoided. In particular, the emergence of electricity as a low-carbon fuel provides a powerful lever for achieving reductions in other sectors of the economy at lower cost. While the analysis suggests that there is no free lunch, the bill, which may indeed be well worth paying, can be greatly reduced through an accelerated R&D program and successful diffusion of new technology throughout the economy.