Role of endogenous energy efficiency improvement in global climate change mitigation

Improving the energy efficiency of conventional energy services is an essential way to cope with global CO₂ emissions mitigation. To date, energy efficiency improvement (EEI) has been broadly introduced exogenously in integrated assessment models (IAMs) by virtue of the autonomous energy efficiency improvement (AEEI) coefficient; however, it is usually good at capturing the EEI driven by non-price factors, while weak in describing the EEI induced by policy incentives. In this paper, we introduce an endogenous EEI (EEEI) mechanism in an IAM, called E3METL, to explore the impacts of EEEI on the global macro-economy, CO₂ emission paths, and timing of carbon mitigations. The results reveal that (1) introducing EEEI significantly improves gross world product (GWP) gains, and this positive effect is partly offset when carbon restriction policies are implemented; (2) R&D investment dedicated to enhance energy efficiency limits R&D expenditures for other alternative technologies, and this effect will impede the development of non-fossil technologies; (3) EEEI may perform as one of supporting factors to delay the actions of carbon reduction; moreover, the introduction of EEEI lowers the optimal carbon tax level by 7.8 % on average, as compared to the no EEEI case.