Impact of endogenous learning curves on maritime transition pathways

Abstract

The maritime industry is a crucial hard-to-abate sector that is expected to depend on high-energy density renewable liquid fuels in the future. Traditionally, decarbonization pathways have been assessed assuming exogenous cost trajectories for renewable liquid fuels based on an exogenous learning curve. While past studies have looked at the impact of endogenizing learning curves for a specific technology utilizing linear approximation, a fully endogenous direct non-linear implementation of learning curves in a detailed sectoral model (maritime industry) that explores dynamics concerning sensitive parameters does not yet exist. Here, we apply an open-source optimization model for decarbonizing the maritime industry and further develop the model by encompassing a nonconvex mixed-integer quadratically constrained programming (nonconvex MIQCP) approach to analyze the impact of endogenized learning curves for renewable fuel costs following an experience curve approach. We find that global greenhouse gas emissions are significantly lower (up to 25% over a 30-year horizon) when utilizing endogenously modeled prices for renewable fuels compared to commonly used exogenous learning frameworks. Furthermore, we find that conventional modeling approaches overestimate the cost of climate mitigation, which can have significant policy implication related to carbon pricing and fuel efficiency requirements. In a broader context, this emphasizes the potential opportunities that can be achieved if policymakers and companies accelerate investments that drive down the costs of renewable technologies efficiently and thus trigger endogenous experience-based learning in real life.