Currently, there’s no magic bullet for fossil fuels—no one energy technology that can provide a cheap and reliable alternative capable of supporting the world’s growing energy needs. Instead, decision-makers looking to lower greenhouse gas emissions must choose from an expansive menu of technology and policy options.
MIT economist Sergey Paltsev studies this array of technology and policy options, with the goal of easing any economic growing pains that might result from the world’s energy transition. Though his research spans a wide range of topics and regions, it is tied together by a common thread: understanding the economic and climate impacts of energy decisions.
“The world’s energy appetite is growing—the question is how do different technologies and policies fit into the picture?” says Paltsev, the deputy director of the MIT Joint Program on the Science and Policy of Global Change. “More importantly, what is the best way to add those technologies to our energy systems so that the economy continues to grow?”
As one example, Sergey points to ongoing research on CO2 emissions from vehicles in the EU. The European Commission currently sets CO2 standards for cars, which limit emissions from vehicles. Paltsev and colleagues at the Joint Program found that an alternate policy, where emissions from cars are covered by emissions trading, could achieve the same reduction at a much lower cost, saving the EU €25–60 billion.
“The goal of these policies is so important— to protect the climate. That goal has to be implemented somehow.” Paltsev says. “As people say, the devil is in the details. We want to make sure that any policy prescriptions being offered are realistic, and that there aren’t any hidden details or unintended consequences.”
Paltsev has accumulated a diverse research portfolio during his efforts to understand the economic impacts of policy implementation. Among other topics, he has studied the deployment of advanced energy technologies, air pollution health impacts, the economic costs of vehicle and power plant emissions standards, emissions from fracking, the liquefied natural gas (LNG) market, biofuels and their impacts on land use change, and design of emission mitigation pathways. Paltsev is also a lead author of the chapter on transforming energy pathways in the UN Intergovernmental Panel on Climate Change’s (IPCC) most recent climate assessment report.
Road to economics
Paltsev started his career as a computer engineer and designer. While he was pursuing a graduate degree in radiophysics and electronics in Belarus, he heard about a US program offering economics training for scientists in the former Soviet Union. Paltsev applied to the highly competitive program, and was selected to study for a year at The Economics Institute in Boulder, Colorado.
He then returned to his alma mater, Belarusian State University, where he founded a business school with the help of Charles Becker, the president of The Economics Institute and support from the US Agency for International Development (USAID). The first western-style business school in Belarus, it has since grown into the university’s School of Business and Management of Technology.
After two years of managing the program and teaching economics, Paltsev decided that he needed to learn more in order to pursue his own economic research agenda. He returned to the US to study with Thomas Rutherford at the University of Colorado at Boulder. Rutherford is the creator of MSPGE (Mathematical Programing System for General Equilibrium Analysis), a computer modeling program. MSPGE now serves as the foundation of the EPPA Model, which is the Joint Program’s primary economics research tool.
Armed with the skills to do his own research, Paltsev turned his attention to a variety of projects. In one project he evaluated Russia’s tax system with the World Bank; in another, social security reform in Kyrgyzstan; in a third, he looked at how the Kyoto Protocol could inadvertently increase emissions in non-participating countries.
In 2002, Paltsev came to the Joint Program, which has allowed him to delve into new research areas. “A great strength of the Joint Program is that you directly interact with scientists from so many different fields,” he says. “I work with atmospheric modelers, ocean modelers, land and water modelers. It’s really a unique place.”
Always one-step ahead
Helping decision-makers make informed energy choices means always being one step ahead of the latest developments in the energy world, Paltsev says. “One of the reasons I enjoy being at the Joint Program is that we have constant interaction with government officials and industry representatives,” he says. “It’s a reality check. We aren’t just working with theoretical structures.”
His current work focuses on providing solutions to a number of emerging energy issues. One area of research is assessing nuclear power as a replacement for China’s coal-fired power plants. China is a heavily coaldependent country, and if it is to achieve its goals of improving local air quality and reducing its carbon footprint, it will have to move away from coal.
Another area of ongoing research focuses on natural gas development. “A lot of people say that natural gas is a bridge energy,” Paltsev says. “Well, how long is that bridge, or is it a bridge to nowhere?” Natural gas is often identified as another replacement for coal, since it is a relatively low-carbon fuel. Paltsev and colleagues are studying the natural gas development and how recent low oil prices might affect global natural gas markets.
A third area of research involves figuring out ways to increase the use of renewable technologies like wind and solar power. Paltsev is studying how to counter the intermittency of these power sources, the major obstacle blocking wider use of these technologies.
In the search for efficient low carbon energy sources, solutions always need to be realistic, Paltsev says. “Economics matters. The energy conversation starts with fossil fuels, which are a very efficient source of energy,” he says. “Whatever you create as an alternative has to beat fossil fuels economically, and that is going to be a tough job. I am optimistic that we will find a way for a better future. This is exactly what we are working on at the MIT Joint Program.”