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Society is making increasing efforts to become more sustainable by fostering new technologies such as renewable energy. Often, there are significant challenges to introducing new technologies because existing infrastructure, institutions, social groupings, and behaviours have co-evolved with and consequently support incumbent technologies - a condition known as lock-in. To support efforts to introduce new technologies, researchers have developed conceptual frameworks that aim to increase our understanding of socio-technical change. One promising framework is Strategic Niche Management (SNM); however despite its strength as an ex post analytical tool, SNM has yet to be used to guide experiments with new technologies. This thesis aims to make SNM more usable for those introducing new technologies by responding to four weaknesses identified in existing literature: a weak link between the conceptual framework and action, the vague role of actors, an inadequate appreciation of issues of consensus and limits of influence, and an inadequate appreciation of the challenges that actors may face. This is achieved by identifying promising insights and testing them on a case study of wind power in Australia. The literature review identifies dynamics that have been linked to positive feedbacks in the development of new technologies and socio-technical change. These are: stimulating demand, increasing use, learning and articulation, increasing functionality, decreasing costs, decreasing uncertainty, embedding and alignment, increasing legitimacy, attracting actors, and strengthening expectations and visions. These dynamics can be used to provide a better link between theory and action. The review also identifies particular actor roles - such as niche manager, macro actor, prime mover, and dedicated network builder - and actions that actors in these roles may take. These roles and actions are linked to the dynamics. Also reviewed are issues related to consensus and limits of influence; a particularly useful concept in this regard is resource interdependency. Finally, the review identifies challenges to encouraging the dynamics aimed at helping actors to anticipate problems in the introduction of new technologies. T he relevance of this approach and applicability of these insights are tested with a case study of wind power in Australia. The case study explains changes related to grid-connected wind power in Australia between about 1997 and 2007. There was significant socio-technical change: for example, installed grid-connected wind farm capacity grew from about 1 MW to almost 900 MW, an industry and industry association formed, there were unprecedented changes in energy policy, new high-level actor groups formed to oversee the grid-integration of wind power, Governments amended planning schemes, and public opinion was increasingly articulated. The dynamics identified in the literature review were all relevant to wind power. The study provides examples of the actors that can encourage these dynamics and how they might do so. Most challenges identified in the literature review were relevant to wind power and possible strategies for managing them were identified. Also revealed were challenges in transitional strategies, legitimacy of the technology and consensus. These findings are discussed in detail. These findings are intended to help actors foster technologies for sustainability.

This paper investigates the potential for a carbon tax to induce R&D, and for the consequent induced technical change (ITC) to lower the macroeconomic cost of abating carbon emissions. ITC is modelled within a general equilibrium simulation of the U.S. economy by the effects of emissions restrictions on the level and composition of aggregate R&D, the accumulation of the stock of knowledge, and the industry-level reallocation and substitution of intangible services derived therefrom. Contrary to other authors, I find that ITC's impact is large, positive and dominated by the latter "substitution effect," which mitigates most of the deadweight loss of the tax. / Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/). / This research was supported by the Offce of Science (BER), U.S. Department of Energy, Grant No. DE-FG02-02ER63484, and by funding from the MIT Joint Program on the Science and Policy of Global Change, which is supported by a consortium of government, industry and foundation sponsors.

This dissertation consists of three essays on Economic Growth. The first essay introduces directed technical change in a growth model with environmental constraints. The final good is produced from ”dirty” and ”clean” inputs. We show that when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation towards clean inputs; and that delay in intervention is costly as it later necessitates a longer transition phase with slow growth. The second essay explains how unilateral environmental policies undertaken by a group of committed countries can ensure sustainable growth in the presence of directed technical change. There are two countries and two tradeable goods: a nonpolluting good and a polluting one, which, itself, is produced with a clean and a dirty input. Innovation can be targeted at the non-polluting sector, at clean or at dirty technologies. I show that sustainable growth can generally not be achieved by unilateral carbon taxes but can be achieved by a temporary unilateral combination of clean research subsidies and a tariff. I characterize the first best policy, the world optimal policy under the constraint that one country must be in laissez-faire, and the optimal policy from the viewpoint of a single country. The third essay shows that long-term relationships, which reduce the static costs associated with low contractibility, create dynamic inefficiencies. We consider the repeated interaction between final good producers and intermediate input suppliers, where the provision of the intermediate input is non contractible. Producer/supplier pairs can be good matches or bad matches (featuring lower productivity). We build a ”cooperative” equilibrium that features cooperation in good matches without any collusion amongst suppliers. We contrast this set-up with the Nash equilibrium where cooperation is precluded and a contractible setting. Every period one supplier has the opportunity to innovate. We show that innovations need to be larger to break up existing relationships in the cooperative case than in the contractible and Nash cases. The rate of innovation in the cooperative case is lower than in the contractible case, and can be lower than in the Nash case. / Economics

The unequal distribution of gains from technology between favorable and unfavorable rice environments in Asia can widen if future transgenic rice varieties cannot be adopted in less favored regions. This study investigates the potential economic impacts of three transgenic rice technologies: stemborer resistance, for favorable irrigated environments; drought resistance, for unfavorable non-irrigated environments; and herbicide resistance, which can potentially benefit any of the environments but can only be adopted in areas under direct seeding. Specifying individual technologies contributes to a better comparative assessment of impacts from transgenic rice. The simulation uses a modified version of the Global Trade Analysis Project (GTAP) model with several innovative features: the database and code represent the distinct rice environments for both paddy and seed sectors; monopoly power is included in the model as a markup tax instrument when private firms sell herbicide resistant rice seed; and private rents can be transferred between regions and change income computation in the model. Equivalent variation measures obtained from simulations are similar at 2.3 billion, 2.5 billion and 2.2 billion dollars for stemborer, drought and herbicide resistance respectively. All technologies increase global rice output and reduce rice prices, while keeping labor wages at stable levels. Private provision of herbicide resistance rice generates benefits of 2.05 billion dollars while creating 122 million dollars in private profits. Although profits increase with higher markups, there are still large social benefits to realize from herbicide resistance technology. However, producers' response to reduced profitability is not accounted for and adoption is an exogenous variable in the model. The results suggest that the large expected impact from drought resistant rice supports public research investment on this technology. Joint efforts between public and private research sectors can increase the probability of success, and mechanisms to promote private research for unfavorable environments should be developed. Public policies should also remove obstacles that prevent firms from undertaking joint research with the public sector. Outcomes from public research, such as improved germplasm and spread of direct seeding techniques, also benefit the private sector and should act as an incentive for firms to build strategic alliances. / Ph. D.

As concern grows about energy and environment issues, energy and environmental modeling and related policy analysis are critical issues for today's society. Polluting firms such as coal power plants play an important role in providing electricity to drive the U.S. economy as well as producing pollution that damages the environment and human health. This dissertation is intended to model and estimate polluting firms' production using nonparametric methods. First, frontier production function of polluting firms is characterized by weak disposability between outputs and pollutants to reflecting the opportunity cost to reduce pollutants. The StoNED method is extended to estimate a weak disposability frontier production function accounting for random noise in the data. The method is applied to the U.S. coal power plants under the Acid Rain Program to find the average technical inefficiency and shadow price of SO2 and NOx. Second, polluting firms' production processes are modeled characterizing both the output production process and the pollution abatement process. Using the law of conservation of mass applied to the pollution abatement process, this dissertation develops a new frontier pollutant function which then is used to find corresponding marginal abatement cost of pollutants. The StoNEZD method is applied to estimate a frontier pollutant function considering the vintage of capital owned by the polluting firms. The method is applied to estimate the average NOx marginal abatement cost for the U.S. coal power plants under the current Clean Air Interstate Rule NOx program. Last, the effect of a technical change on marginal abatement costs are investigated using an index decomposition technique. The StoNEZD method is extended to estimate sequential frontier pollutant functions reflecting the innovation in pollution reduction. The method is then applied to estimate a technical change effect on a marginal abatement cost of the U.S. coal power plants under the current Clean Air Interstate Rule NOx program.

This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward-looking CGE model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We find the cost-effective climate policy to include a combination of R&D subsidies and CO2 emission constraints, although R&D subsidies raise the shadow value of the CO2 constraint (i.e. CO2 price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that CO2 constraints differentiated toward CO2-intensive sectors are more cost effective than constraints that generate uniform CO2 prices among sectors. Differentiated CO2 prices, through technical change and concomitant technology externalities, encourage growth in the non-CO2 intensive sectors and discourage growth in CO2-intensive sectors. Thus, it is cost effective to let the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used to reduce CO2 emissions. / Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).

Doctor of Philosophy / Department of Agricultural Economics / Jeffrey M. Peterson / Nathan P. Hendricks / The two studies presented in this dissertation examine incentives for groundwater extraction and their resulting effect on aquifer depletion. Both studies apply dynamic optimization methods in a context of irrigated agriculture in arid and semi-arid regions such as in western Kansas. The first study examines the effects of capital subsidies aimed at increasing irrigation application efficiency. The second study examines the effects of changing incentives posed by changes in climatic patterns and by technical progress in the form of increasing crop water productivity. Both studies have significant policy and groundwater management implications. Subsidies for the adoption of (more) efficient irrigation technologies are commonly proposed and enacted with the goal of achieving water conservation. These subsidies are more politically feasible than water taxes or water use restrictions. The reasoning behind this type of policy is that increased application efficiency makes it possible to sustain a given level of crop production per acre with lower levels of groundwater pumping, all else equal. Previous literature argues that adoption of more efficient irrigation systems may not reduce groundwater extraction. Rewarding the acquisition of more efficient --and capital intensive-- irrigation equipment affects the incentives farmers have to pump groundwater. For instance, the farmer may choose to produce more valuable and water intensive crops or to expand the irrigated acreage after adopting the more efficient irrigation system. Hence, the actual impact of the policy on overall groundwater extraction and related aquifer depletion is unclear. The first chapter examines the effects of such irrigation technology subsidies using a model of inter-temporal common pool groundwater use with substitutable technology and declining well-yields from groundwater stocks, where pumping cost and stock externalities arise from the common property problem. An optimal control analytical model is developed and simulated with parameters from Sheridan County, Kansas-- a representative region overlying the Ogallala aquifer. The study contrasts competitive and optimal allocations and accounts for endogenous and time-varying irrigation capital on water use and groundwater stock. The analysis is the first to account for the labor savings from improved irrigation technologies. The results show that in the absence of policy intervention, the competitive solution yields an early period with underinvestment in efficiency-improving irrigation technology relative to the socially efficient solution, followed by a period of over-investment. This suggests a potential role for irrigation capital subsidies to improve welfare over certain ranges of the state variables. In contrast to previous work, the findings are evidence that significant returns may be achieved from irrigation capital subsidies. Finally, a policy scenario is simulated where an irrigation technology subsidy is implemented to explore whether such a program can capture significant portions of the potential welfare gain. Results indicate that the technology subsidy can improve welfare, but it captures a relatively small portion of the potential gains in welfare. The second chapter presents a dynamic model of groundwater extraction for irrigation where climate change and technical progress are included as exogenous state variables-- in addition to the usual state variable of the stock of groundwater. The key contributions of this study are (i) an intuitive description of the conditions under which groundwater extraction can be non-monotonic, (ii) a numerical demonstration that extraction is non-monotonic in an important region overlying the Ogallala Aquifer, and (iii) the predicted gains from management are substantially larger after accounting for climate and technical change. Intuitively, optimal extraction is increasing in early periods when the marginal benefits of extraction are increasing sufficiently fast due to climate and technical change compared to the increase in the marginal cost of extraction. In contrast, most previous studies include the stock of groundwater as the only state variable and, consequently, recommend a monotonically decreasing extraction path. In this study, the numerical simulations for a region in Kansas overlying the Ogallala Aquifer indicate that optimal groundwater extraction peaks 23 years in the future and the gains from management are large (29.5%). Consistent with previous literature, the predicted gains from management are relatively small (6.1%) when ignoring climate and technical change. The realized gains from management are not substantially impacted by incorrect assumptions of climate and technical change when formulating the optimal plan.

There is a general consensus in the literature that carbon capture and storage (CCS), a technology that controls CO2 emissions from fossil fuel power plants, figures to be a critical technology to reduce CO2 emissions to CO2 concentration stabilization levels prescribed in the literature. We completed three projects that advance the understanding of how technical change in carbon capture affects both near-future costs of CCS and the economy in the long term. First, we conducted a literature review of near-future capture cost estimates in order to get an idea of how expensive carbon capture will be in the near-future. The literature indicates that pre-combustion capture is the least expensive carbon capture technology because its combustion process best facilitates carbon capture. Second, we explored the limits of incremental technical change in each near-future capture technology using a performance-cost model. The results of the sensitivity analysis showed that pre-combustion capture could be the least expensive capture technology after incremental technical change has occurred. Third, we used an integrated assessment model (IAM) to investigate how rapid incremental and breakthrough technical change in carbon capture could impact the electric energy market, total CO2 abatement cost and CO2 price over time. We modeled breakthrough technical change using data from a paper in the literature that provides cost and performance estimates for a radical carbon capture technology still in the early stages of research and development (R&D) (Baker, Chon, & Keisler, 2009). CCS dominates electricity market share over time given a chemical looping breakthrough.