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What benefits can result from expanding Nordhaus's Dynamic Integrated Climate-Economy (DICE) model to incorporate the energy sector?
The DICE Model has been modified to incorporate the energy sector within a constant elasticity of substitution (CES) production function that includes energy inputs. In addition, the model is also being modified to characterize the linkages between technological progress and the economy, to simulate technology transfer in a two-region framework, and to investigate the relationship between human capital and technological advances.
Technological change was explicitly incorporated into a model of the economy and climate change. The study focuses on the role of technological advances that would impact the level of uncontrolled greenhouse-gas emissions from fossil fuels, the ability to mitigate emissions, the development of nonfossil-fuel technologies, the ability to adapt to potential changes in climate, and economic productivity.
Nordhaus's DICE model has also been expanded into a two-region model, with one region being the developed countries and the other region being the less-developed countries.
The study provides an example of assessments specifically showing the value of investment in different energy technology R&D options.
Lee, R. and S. Das. 1995. Modification of the DICE Model to Include the Energy Sector. Oak Ridge National Laboratory, Oak Ridge, Tenn. (in preparation).
Integrated Assessment Briefs. 1995. ORNL/M-4227. Oak Ridge National Laboratory, Oak Ridge, TN.