Useful models for simulating policies to induce technological change

Conventional top-down and bottom-up energy–economy models have limitations that affect their usefulness to policy-makers. Efforts to develop hybrid models, that incorporate valuable aspects of these two frameworks, may be more useful by representing technologies in the energy–economy explicitly while also representing more realistically the way in which businesses and consumers choose between those technologies. This representation allows for the realistic simulation of a wide range of technology-specific regulations and fiscal incentives alongside economy-wide fiscal incentives and disincentives. These policies can be assessed based on the costs required to reach a goal in the medium term, as well as on the degree to which they induce technological change that affects costs over long time periods.