Actors involved in the transition and their behaviour (WP2)

Objectives

– Analyse consumer behaviour and preference heterogeneity in novel ways within climate and energy models.

– Advance the economic modelling of new climate transition-related technologies and their utilisation.

– Propose new business/service models and innovative technologies in agent-based modelling (ABM) and lifestyle modelling.

– Achieve theoretical breakthroughs in establishing behavioural foundations for climate change adaptation;

– Build new theoretical foundations for distributional and ethical concerns related to climate change models. 

Task 2.1: Demand, Behaviour 

We analyse energy demand and savings, taking into account the flexibility of demand in relation to time-of-use pricing, as well as the acceptance of remote control and high load restrictions. This task has clear links to the fields of management, psychology and other social sciences at M4G institutions, and draws on their methodological expertise. The preferences and behaviour investigated in this task combine economic and socio-psychological behavioural theories, including rational inattention, bounded rationality and other biases that contribute to the energy efficiency gap. We estimate the parameters of energy demand, with a focus on non-linear tariffs, as well as the provision of subsidies and discounts, in order to mitigate adverse social impacts. We consider energy literacy and expectations regarding future energy prices, which are crucial for making energy-efficient investment decisions. We examine the barriers to, and potential for, the adoption of advanced low-carbon technologies, including alternative-powered vehicles. We model uncertainty on both the demand and supply (technology) sides. This task also involves estimating the parameters of climate change and energy transition modelling. We investigate relevant econometric techniques and study their properties using a range of case studies, drawing on the expertise of M4G microeconomists and microeconometricians.

Task 2.2: Technology uptake

This task focuses on the economic aspects of new technologies used for climate change mitigation, adaptation and energy transition. This includes earth- and space-related technologies, such as geoengineering, geothermal energy, solar radiation modification, and the removal and conversion of CO₂, methane, and other greenhouse gases. It also covers the utilisation of novel classes of quantum materials and consumer-oriented technological innovations, such as electric cars. We contribute to the assessment of CO₂ removal technologies. Our work covers the economics of hydrogen and sustainable fuels, modelling consumer choice, and the interfaces between decarbonisation and technological uptake. Technical and modelling insights from economic models focused on technology and innovation are employed in this context.

Task 2.3: Consumer/Business Models, Agent Based Models (ABM), Lifestyle

We investigate the potential for new business and services models of environmentally friendly production with fundamental innovations in the energy industry and consumption (certification of origin for renewable energy, sharing goods). This includes the role of prosumers (prosumer-to-grid models), peer-to-peer models, small-scale smart grids, information and communication technologies, and blockchain-based energy service models. This connects with management, psychology, and other social sciences at M4G institutions and leads to innovative inclusion of individual choices and lifestyle changes in IAM models. We deal with climate and energy economics modelling of transport and lifestyle choices between public transit, car transport, cycling, and walking. ABM modelling techniques are widely developed and used in this task.

Task 2.4: Adaptive behaviour 

This task involves modelling the adaptive behaviour of consumers and firms in order to minimise the adverse effects of climate change. Examples include the use of air conditioning to reduce the impact of heatwaves, changes in tourism patterns and the development of vaccination schemes to reduce the health risks associated with vector-borne diseases. Building on behavioural theories in both economics and sociology, this task further develops behavioural methodology in theoretical and applied directions. We analyse the acceptability and preferences for competing and complementary adaptation measures (nature-based and hard versus soft measures). Evidence on the behaviour of economic agents is collected and analysed using meta-analysis techniques. Adaptation in impact assessment and economic models relates to Work Package 1 and the natural scientists at M4G institutions. Techniques that model the economic behaviour of individuals and institutions are employed here.

Task 2.5: Fairness, Justice and Equity

This task focuses on creating synergy through the just transition dimension of green reforms. The aim is to secure social support for EU green transition policies. The task will explore the distributional consequences of the impacts of climate change and policies, both across and within generations. It also investigates discounting, time preferences, and how these preferences develop over time. The task mainly focuses on theoretical modelling in economics, but also has important connections to ethics and moral philosophy. Consequently, it has links to the social sciences and humanities. Our approach to fairness and justice also incorporates legal theory and practice, as well as the development of legal methodologies, in conjunction with the investigation of these issues in the context of ethics and moral philosophy. The concepts of fairness, justice, and equity are central to classical economic theory and modern developments in decision theory and the theory of strategic behaviour, particularly game theory. Consequently, this task will utilise and further develop research topics in these areas.