Economic activity - EPPA

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The social-economic drivers of EPPA also include a set of endogenously determined variables, which consist of savings, investment, resource depletion of fossil fuels, and the evolution of technology specific factor (a.k.a. fixed factor) supply for each backstop technology. Savings provide funds for investment, which increases the output of the following period. On the other hand, the use of fossil fuels in the current period decreases the resources available for future consumption. In addition, EPPA considers the technology specific factor to model the introduction of a backstop technology. The limited supply of the factor at the beginning captures the phenomenon that costs of operating a new technology tend to be higher when the technology is at the early stage of introduction, but the costs may go down gradually with learning-by-doing, knowledge accumulation, etc. The parameterization of technology specific factors is based on empirical evidence presented in Morris et al. (2019) [1].

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Model Documentation - EPPA

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Model information
Model link
Institution Massachusetts Institute of Technology (MIT), USA,
Solution concept General equilibrium (closed economy)
Solution method Optimization
  1. Morris, J.F., J.M. Reilly and Y-H. H. Chen (2019). “Advanced Technologies in Energy-Economy Models for Climate Change Assessment.” Energy Economics, 80 (476-490) (doi: 10.1016/j.eneco.2019.01.034).