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Energy and Urban Systems Transitions 

Societies around the world are currently faced with the need to facilitate a rapid energy transition to a zero-emissions economy powered by nuclear and renewable resources, to address climate change and air-quality. This is a daunting task, given that the energy system produced 13 Gigatonnes of oil equivalent [Gtoe] in 2016, more than doubling in capacity in the last four decades [40]. Of this, China produced 2.5 Gtoe while Canada produced 0.471 Gtoe [40]. At the same time, the energy system as a whole emitted 32 Gigatonnes of CO2, making it the major contributor to anthropogenic climate change. Moreover, electricity production and transportation are responsible for almost all air pollutants affecting human health and ecosystems [11-13].   The size of the task notwithstanding, the urgency is real as decisions regarding energy infrastructure will impact the world for the next decades.

In determining how to transition to a zero-emissions economy, two tightly linked factors, cities and energy systems, must be considered. Urbanization, the process of moving people away from agricultural fields and into manufacturing and service jobs, has been one of the defining features of the economy since the Industrial Revolution.  In 2016, more than half of the world’s population lived in urban settlements. Around five hundred million people lived in 31 “megacities”, while almost two billion lived in cities of less than half a million people [1]. Urban systems, defined as a collection of cities and the infrastructure that connects them, consume almost three-quarters of global energy and generate about three-quarters of global carbon emissions, while 90% of the energy used in transportation is consumed in cities [13].

Energy and urban systems are two of the most important sectors in the economy. Understanding the fundamental forces that have shaped our urban systems is necessary for effectively transitioning to an energy system that is capable of providing people with the power they need to live their lives, while minimizing the impacts on the environment. Facilitating such an energy transition is one of the top challenges of our generation. This research program will directly address this challenge by understanding how the structure of the current energy system came to be, the role that access to energy played in creating current urban systems, and the role that energy and urbanization will play in the next energy transition and what are the impacts of this transition on the environment. In doing so, this research will guide energy and urbanization policies that will help the transition towards a zero-emissions economy.

In order to achieve the long-term goal of facilitating a zero-emissions economy, the proposed research will address two short-term objectives:

Objective #1 — To increase the understanding of energy transitions as a process driven by the interaction of energy systems and urban systems.

Objective #2 — To quantify the effects of energy transitions on the environment and to design energy and urbanization policies to enable an efficient and equitable transition.

The first objective develops the energy and urbanization model of energy transitions. This model will capture the role of energy in determining why and how cities are organized in urban systems and how those urban systems affect the size and composition of the energy system. The second objective focuses on introducing air-quality and climate change into the energy and urbanization model. It does so by utilizing state of the art techniques developed by Dr. Moreno-Cruz and his team. It then brings the energy and urbanization model to data, creating a calibrated simulation model for the United States and Canada that can be used as a testbed for energy and urbanization policy design. Understanding the reciprocal relationship between the urban and energy systems is imperative to developing policies to enable a sustainable energy transition to a zero-emissions energy system.

The Economics of Geoengineering

Dr. Moreno-Cruz is a leading expert on the Economics of Geoengineering. With over 10 publications on the topic and 500 citations, this work represents Dr. Moreno-Cruz’s largest contribution to the research community. Dr. Moreno-Cruz and his coauthors developed the first comprehensive theoretical framework to capture the most relevant aspects of solar geoengineering [6]. They then expanded it to account for regional inequalities, where they introduced the Residual Warming Framework, as a new way to look at solar geoengineering. This seminal paper combines economics and simulation from general circulation models, a truly interdisciplinary exercise that exemplifies Dr. Moreno-Cruz’s work from its very beginnings. In a follow-up paper, he added uncertainty into the same framework to discuss the trade-off of introducing a novel technology to deal with the risks of climate change to show that the possibility of geoengineering is worth a few trillion dollars [20].  That is, comparing a future scenario where climate change turns out to be more dangerous than expected, the possibility of solar geoengineering affords flexibility to deal with those unexpected risks.

Having dealt with how solar geoengineering would change our understanding of optimal climate policy design, the next step in Dr. Moreno-Cruz’s research agenda was to model how solar geoengineering would modify our understanding of international politics. In the first paper, he examined the economic issues introduced when geoengineering is made available in a world where strategic interaction leads to under-provision of mitigation due to free-riding; where free-riding is defined as the observed tendency to transfer the costs of a mutually desirable outcome onto others [16]. This paper showed how the impact of introducing geoengineering depends quite delicately on the degree of similarity between countries. When countries differ in their underlying characteristics, the levels of mitigation can increase rather than decrease. This ran counter to the prevailing theory at the time, that solar geoengineering would reduce emissions reduction efforts, and has since changed the tone of the conversation towards a more nuanced approach to the economics of geoengineering. In a follow-up paper [18], using results from a general circulation model, Dr. Moreno-Cruz and his coauthors showed that regional differences in climate outcomes incentivize countries to form international coalitions that are as small as possible, while still powerful enough to deploy solar geoengineering. These incentives differ markedly from those that dominate international politics of greenhouse-gas emissions reduction, where the central challenge is to compel free riders to participate. This paper was listed on the Highlights of 2013 as one of the most innovative ground-breaking articles published in Environmental Research letters. The next relevant contribution was a response to a widely held belief that the introduction of geoengineering would diminish the incentives to reduce emissions in future generations [19]. In this paper, Dr. Moreno-Cruz showed a situation where mitigation and geoengineering are strategic complements, not substitutes as presented in the previous literature. This paper was chosen as one of the best papers in the journal that year earning a commendation for excellence by the 2014 Environmental and Resource Economics Award Selection Committee.

There is more work in progress. A broader review of the topic is forthcoming in the Annual Review on Environment and Resources [54].  A paper proposing a portfolio approach to geoengineering technologies is under review at Environmental Research Letters [56]. Any one geoengineering technology could be too risky or costly to do the job by itself, but a coordinated intervention that employs different methods with diverse attributes could achieve climate impact reduction goals while limiting risk. In another working paper, Dr. Moreno-Cruz expands the geoengineering framework to account for negative emissions technologies and adaptation to show that (i) a carbon tax is the optimal response to the unpriced carbon externality only if it equals the marginal cost of carbon geoengineering; (ii) the introduction of solar geoengineering leads to higher emissions yet lower temperatures, and, thus, increased welfare; and (iii) solar geoengineering, in effect, is a public goods version of adaptation that also lowers temperatures [65]. This new work will play an important role in the proposed research agenda as it provides alternative methods of dealing with climate change that can reduce the need for a speedy energy transition or buying time until the reduction in emissions achieved by an energy transition to low-carbon fuels are visible in the climate system.

Integrated assessment models of climate change

Dr. Moreno-Cruz’s research provides input into international policy discussions, and as such, a demand for a more quantitative analysis has emerged.  In the papers discussed below, Dr. Moreno-Cruz and co-authors make use of standard tools in climate policy, such as integrated assessment models, to provide estimates of the effects of introducing solar geoengineering on climate policy, e.g. carbon pricing. Dr. Moreno-Cruz has developed a model that incorporates geoengineering into an Integrated Assessment Model (G-DICE). Using this framework, Dr. Moreno-Cruz and co-authors show that the price of carbon is 8%–10% lower than the price recommended by a model without solar geoengineering, even under very conservative baseline parameter values [1]. Moreover, the optimal amount of solar geoengineering is more sensitive to uncertainty than is the optimal amount of abatement. The G-DICE model was then extended to allow for tipping points (e.g. the sudden disintegration of the West Antarctic Ice Sheet) [9]. Dr. Moreno-Cruz’s team found that the capacity of solar geoengineering to deal with climate damages depends on the type of tipping point: it can address temperature effects associated with reduction in carbon sinks but cannot do much to reduce direct economic losses. G-DICE can be applied to study a large variety of problems such as the optimal deployment under uncertainty of geoengineering strategies, and because it is freely available and developed using open-source software, it can be used by researchers and policymakers around the world as an input when making decisions about climate change policy.

Dr. Moreno-Cruz has expanded this work to develop similar Integrated Assessment Models to answer a variety of questions in other areas of climate change economics, such as climate adaptation and carbon policy. Most of this work has been done in collaboration with colleagues from the Department of Global Ecology at Stanford University, where Dr. Moreno-Cruz served as a visiting researcher and adviser for the Carnegie Energy Innovation. In collaboration with Ken Caldeira at Stanford, a paper was produced that showed that adaptation to some amount of change instead of adaptation to ongoing rates of change may produce inaccurate estimates of damages to the social systems and their ability to respond to external pressures [8]. The goal of this paper was to create a narrative whereby adaptation is a process that evolves continuously over time and not as a one-off research project.  Once this intuition is placed in the context of adaptation to climate change, adaptation policy should stop being a sequence of reactive responses and become one of planned pro-active ones. In the next paper, they demonstrated that the use of a carbon tax for revenue generation could potentially motivate implementation of such a tax today, but this source of revenue generation risks motivating continued carbon emissions far into the future [3]. The contribution to the literature is a reconciliation between the political economy of carbon taxes and the optimal carbon tax; the result thus suggesting that real politics can have a perceived advantage in the short term by increasing revenues and reducing carbon concentrations, but they come at the risk of increased temperatures affecting future generations. This research on climate change has allowed Dr. Moreno-Cruz to write authoritative policy pieces on the economics of climate change.  The first policy paper [13], published in Nature Geosciences, discussed the importance of considering the possibility of abrupt changes in climate system dynamics and how that needs to translate into speedy action in response to climate change. For example, if a region depends on their corals to maintain their tourism industry, once corals are gone so will the incentives for that region to cooperate in any mitigation effort. This work was discussed broadly in the general media with mentions in Slate, Newsweek, the Carbon Brief, among others (please see Section 6, under Media coverage).  The second policy paper [11], published in Science, outlined three areas of climate economics research where progress is both necessary, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon, (ii) improving understanding of the consequences of particular economic policies (e.g. carbon taxes), and (iii) improving understanding of the economic impacts and policy choices in developing economies.  This paper has been downloaded more than 20,000 times from the Science website (as of March 2018). A follow-up letter in Science also addressed the need to (iv) better understand the economic impacts of geoengineering [10].  Combined, these publications are setting the agenda for the climate economics research community, encouraging interdisciplinary collaborations, in particular as it pertains to the economics of adaptation and geoengineering, as they are to become more relevant climate intervention in the near future.

Dr. Moreno Cruz’s substantial expertise in climate change economics, and his vast network of collaborators across multiple disciplines including engineering, climate science and atmospheric chemistry, will prove valuable in Objective 2 of the proposed research as he expands the energy and urbanization model of energy transitions to account for the energy transition impacts on the climate system (i.e., changes in the emissions of greenhouse gases) and the impacts of climate change on the energy-urban system (i.e., climate induced migration crowding out cities and their capacity to satisfy the demand for services).