Modeling the Impact of Technical Change on Emissions Abatement Investments in Developing Countries

The cost of greenhouse gas (GHG) mitigation over time depends on both the rate of technical change in leading-edge technologies and the diffusion of knowledge and capabilities throughout international markets. This paper presents a framework developed by the U.S. Environmental Protection Agency (EPA) and RTI International (RTI) for incorporating technical change in non-CO2 GHG mitigation projections over time. An engineering (bottom-up) approach is used to model technical change as a set of price and productivity factors that change over time as a function of technology advances and the location of developing countries relative to the technology efficiency frontier. S-shaped diffusion curves are generated, which demonstrate the maturity of the market for a given technology in a given region. The framework is demonstrated for coal mine methane mitigation technologies in the United States and China, but it is applicable for the full range of technology adoption issues.