Technology and the Economics of Climate Change Policy
Prepared for the Pew Center on Global Climate Change
Jae Edmonds, Joseph M. Roop, and Michael J. Scott of Battelle, Washington, DC
Press Release 
Eileen Claussen, President, Pew Center on Global Climate Change
Climate change policy analysis is fraught with uncertainty and controversy, but at least one thing is perfectly clear: technological innovation is the key to addressing climate change. Moving the economy to a greenhouse - friendly future will necessitate a profound economic transition - a transition that simply cannot come to pass without technological progress.
In this report, an impressive team of economists led by Jae Edmonds and Joe Roop explains how economic models of climate change take technological innovation into account. The authors demystify a highly technical subject that is essential to sound policy formulation, raising five central insights:
This report on technological change addresses one of the factors identified by the Pew Center as having the largest influence on economic modeling results. An earlier Center report, "An Introduction to the Economics of Climate Change Policy," by John Weyant describes the five factors, which include: how baseline greenhouse gas projections are measured, what climate policies are considered, how the substitution of goods and services by producers and consumers is represented, and whether and how GHG reduction benefits are addressed. Two other Pew Center reports explore in detail the role of climate policies, with an emphasis on international emissions trading, and the role of substitution in determining the outcome of economic modeling.
The Center and the authors appreciate the valuable insights of several reviewers of early drafts of this paper, including Nebojsa Nakicenovic, Ian Parry, and Alan Sanstad. Special thanks are due to Ev Ehrlich for serving as a consultant for the Center's economics series and to Judi Greenwald for her editorial assistance.