1 PRELIMINARY VERSION: PLEASE DO NOT REDISTRIBUTE OR QUOTE WITCH A World Induced Technical Change Hybrid Model

The need for a better understanding of future energy and technological scenarios, of their compatibility with the objective of stabilizing greenhouse gas concentrations, and of their links with climate policy, calls for the development of hybrid models. Hybrid because both the technological detail typical of Bottom Up (BU) models and the long run dynamics typical of Top Down (TD) models are crucially necessary. We present WITCH –World Induced Technical Change Hybrid model – a neo-classical optimal growth model (TD) with an energy input detail (BU) and endogenous technical change (ETC). In particular, the BU component includes both electric and non-electric energy use, with a total of seven technologies for electricity generation and six for non electricity generation. In contrast to BU model, the allocation of installed capacity among technologies is defined as an optimal inter-temporal strategy. The model endogenously accounts for technological progress, both through learning curves affecting prices of new vintages of capital and through R&D investments. In addition, the model captures the main economic interrelationships between world regions and is designed to analyse the optimal economic and environment policies in each world region as the outcome of a dynamic game. This paper provides a detailed description of the WITC