On the sources of technological change: What do the models assume?

It is widely acknowledged that technological change can substantially reduce the costs of stabilizing atmospheric concentrations of greenhouse gases. This paper discusses the sources of technological change and the representations of these sources in formal models of energy and the environment. The paper distinguishes between three major sources of technological change-R&D, learning-by-doing and spillovers-and introduces a conceptual framework for linking modeling approaches to assumptions about these real-world sources. A selective review of modeling approaches, including those employing exogenous technological change, suggests that most formal models have meaningful real-world interpretations that focus on a subset of possible sources of technological change while downplaying the roles of others.