Jean-Francois Mercure (Exeter) and Hector Pollit (Cambridge Econometrics)

In the first part of the seminar, Hector will introduce the post-Keynesian structure of the E3ME macro-econometric model. He will describe the theoretical basis for the model and key characteristics in terms of assumptions and main properties. He will then show how the model can be applied to assess real-world policies to meet the climate goals that were laid out in the Paris Agreement. He will also present a few examples of how the model has been involved in actual policy making at European level.

In the second part of the seminar, Jean-Francois will discuss an application of the model to study the economic impacts of stranded fossil fuel assets. The world is currently seeing an emergent diffusion of low-carbon technology following the adoption of various policies worldwide. This trend is inconsistent with observed investment in new fossil fuel ventures, which could lead to overcapacity and become stranded as a result. The methodology to project low-carbon technology diffusion within the E3ME-FTT-GENIE integrated assessment model will be discussed. The analysis suggests that substantial amounts of stranded fossil fuel assets (SFFA) could occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted.

Speaker biographies:

Dr Jean-Francois Mercure is a computational scientist in the area of low-carbon innovation, macroeconomics, finance and climate change. He is Senior Lecturer in Global Systems, University of Exeter. His primary expertise lies in technological change dynamics and evolutionary (innovation) economics.He was formerly deputy director of the Cambridge Centre for Climate Change Mitigation Research (4CMR) and head of its energy modelling team. Initially trained in physics and complexity science, he spent the past years designing and building computational models for climate change mitigation research, as well as analysing the theoretical underpinnings of contemporary energy-economy models. Dr Mercure leads modelling efforts at C-EENRG. In collaboration with Cambridge Econometrics and the Open University, the models used at C-EENRG cover technology dynamics, the macroeconomy and the biophysical world (the climate, the carbon cycle, the land surface). This makes a new form of Earth System Model, or Integrated Assessment Model, that is entirely simulation-based, and includes technological change dynamics and policy.

Hector Pollitt is a Director and the Head of Modelling at Cambridge Econometrics. He is a post-Keynesian economist with particular expertise in macroeconomic modelling, which he has developed through more than a decade of experience working with the global macro-econometric E3ME model. His research focuses on the complex linkages between the economy and the consumption of natural resources. Much of his recent work, both on a research and consultancy basis, is centred around applications of the E3ME model for policy analysis. At European level, Hector has contributed macroeconomic analysis to the official Impact Assessments of the Clean Energy Package and Long-Term Strategy. He is also actively involved in modelling exercises in East Asia, in India and in Latin America. In 2015 he published as co-editor the book Low Carbon, Sustainable Future in East Asia: How to improve the energy system, taxation and policy cooperation. Hector’s expertise extends beyond the use of E3ME and he frequently carries out model review and comparison exercises, including for the UNFCCC. He is a Centre Fellow at the Cambridge Centre for Environment, Energy and Natural Resource Governance at the University of Cambridge.

Speakers: Jean-Francois Mercure (Exeter) and Hector Pollit (Cambridge Econometrics)

Released by: SOAS Economics Podcasts