Towards a low-carbon economy: Coping with technological bifurcations with a carbon tax

Abstract

Technological learning is understood as an endogenous mechanism for the diffusion of advanced clean energy technologies. Technological learning is quite uncertain. Previous research showed that an optimization model with uncertain technological learning could generate technological bifurcations: various local optimal solutions of technology development strategies with very similar total costs but different environmental impacts. With a simplified energy system optimization model, this paper explores technological bifurcations and the effect of a carbon tax on the development and diffusion of new energy technologies. With a three-stage analysis, the main findings of this paper are (1) that technological learning, instead of its uncertainty, is an essential mechanism for technological bifurcations, and (2) a carbon tax can reduce carbon emission but not necessarily technological bifurcations. An implication from these findings is that with a carbon tax, there still could be potential for other policy interventions to reduce carbon emissions without much additional cost.