The Effect of Government Actions on Environmental Technology Innovation: Applications to the Integrated Assessment of Carbon Sequestration Technologies

The forecast of technology changes is one of the most important assumptions in most long-term energy, economic models. This project seeks to improve the ability of integrated assessment models (IA) to incorporate changes in technology, especially environmental technologies, cost and performance over time. In this reports, we presents results of research that examines past experience in controlling other major power plant emissions that might serve as a reasonable guide to future rates of technological progress in carbon capture and sequestration (CCS) systems. In particular, we focus on U.S. and worldwide experience with sulfur dioxide (SO2) and nitrogen oxide (NOx) control technologies over the past 30 years, and derive empirical learning rates for these technologies. The patterns of technology innovation are captured by our analysis of patent activities and trends of cost reduction over time. Overall, we found learning rates of 11% for the capital costs of flue gas desulphurization (FGD) system for SO2 control, and 13% for selective catalytic reduction (SCR) systems for NOx control. We explore the key factors responsible for the observed trends, especially the development of regulatory policies for SO2 and NOx control, and their implications for environmental control technology innovation.