UMass Amherst Researchers Say Investing in Better Technology Secures Payoff When Dealing with Climate Change

Erin D. Baker
Senay Solak

AMHERST, Mass. – Researchers at the University of Massachusetts Amherst have concluded that making investments in energy technologies to deal with climate change will always produce a positive payoff – independent of whether it’s part of a go-slow policy or a more aggressive policy for climate change. Moreover, the same set of technologies is at the top of the list for investment even under very different climate policy regimes. Erin D. Baker, associate professor of mechanical and industrial engineering, and Senay Solak, assistant professor of operations and information management, published their findings recently in the journal Production and Operations Management.

The finding is good news because it means that governments can move forward with investments into research in breakthrough energy technologies, such as solar, nuclear and carbon capture, without knowing exactly where politics and science will lead to in climate policy, the researchers say.

Baker and Solak say that with a policy where emissions reductions of carbon dioxide and other greenhouse gases tend to be low, a breakthrough in energy technology tends to significantly reduce the amount of emissions, thus improving the environmental outcomes, such as reducing temperature rise. On the other hand, in a policy where emission reductions are high, a breakthrough in technology tends to significantly reduce the cost of emissions reductions, they say. Hence, investment in energy technologies pays off under both types of policies.

Baker says the research paper,“Management of Energy Technology for Sustainability: How to Fund Energy Technology Research and Development,” is aimed at policy makers and show that progress in fighting climate change is possible even if only moderate changes are achieved through public policies. “If you go slow, breakthroughs will help you go faster,” Baker says. “If you go faster, it costs less. We’re trying to let them know they can invest in technology.”

Solak notes that deciding on a climate change energy technology portfolio is difficult for policy makers, because it involves a number of uncertainties and complex interactions between technologies, the economy and the environment. “We develop a framework to help governments make these portfolio decisions using the best available information as well as insights based on complex economic models,” Solak says. “Using a data-based approach and allowing for multi-stage decision making, we find that optimal portfolios are surprisingly robust to the policy environment, to uncertainty about climate change damages and to assumptions about the true cost of R&D investments.”

Baker and Solak say they have focused mostly on high-risk technologies, such as achieving major improvements in solar cells, and have identified a set of technologies that are effective under different climate policies. This portfolio is the same for the policy suggested by William Nordhaus’ model, in which emissions reductions, using current technologies, are about 24 percent by 2050; and for Al Gore’s suggested policy, in which emissions reductions, using existing technology, is 85 percent by 2050. The researchers say the reason for this is that technological change – improvements in energy technologies – plays a different, but important role in both policy environments.

Baker says the paper is an effort to bring business modeling and scientific discipline into the public policy sphere in order to show a clear path toward progress under differing policy choices made by the government. “We’re trying to apply science to science policy,” Baker says.

The research is funded through a five-year, $434,000 grant from the National Science Foundation.