In a featured commentary post for Natural Energy, researchers – including from the Institute for New Economic Thinking and the Oxford Smith School at the University of Oxford – highlight the challenges facing policymakers working with economic modeling traditional in the public and industrial sectors.
The paper calls for a shift from narrow cost-benefit analysis and modeling based on economic equilibrium to models that capture transition dynamics and represent policy ideas in great detail. These capabilities are needed to match policies that governments are currently designing and implementing, such as the ETS in China, offshore wind auctions in the UK, and the Inflation Reduction Act in the US.
Lead author Dr Pete Barbrook-Johnson, senior research associate at the Institute for New Economic Thinking and the Smith School for Business and Environment at Oxford, said the global policy debate had changed, bringing with it a range of different requirements for economic modelers.
“We are working with partners in China, India, Brazil, the UK and Europe to explore what kind of modeling support they need to understand the energy transition.
“What they are telling us is that they really need models that allow them to capture the detail of policies in order to understand what their impacts might be and how the energy transition might unfold.” We have been developing these capabilities for several years, and this cohort of new models is now coming of age.
“But we have to recognize that we need a new type of modeling that hasn’t been established or used in many places. We must therefore do more to develop and learn from the promising work that already exists. “In this article, we explore what we need to do, such as investing in new teams, working with partners in more countries, and collecting more detailed economic data to match the details of the models,” said Dr Barbrook-Johnson .
INET Oxford Complexity Economics Program Director and Baillie Gifford Professor of the Smith School of complex systems science at the Martin School, Oxford, Doyne Fermiera said there was a risk that traditional economic modelers would be left behind by the energy transition.
“Mainstream economics has failed by providing us with bad advice until now. We are trying to address this by developing an entirely new style of models based on a different set of principles that better explain the empirical facts and can better guide us through the transition.
“This article presents a kind of manifesto on what can be done, including talking about the successes we have had in the EEIST project, where we have given examples of models that we believe do a significantly better job than others.”
“Among other things, we have shown that the energy transition is going to happen much faster than people think, because the costs of renewable energy will fall to a level lower than fossil fuels on a purely economic basis. We need new economic modeling to support this. We still need some government support for technologies such as green hydrogen, which are necessary for storage,” Professor Farmer said.
Source: University of Oxford
Originally published in The European Times.
source link eu news
