Abstract
Massive resource infusion and coordination between state and market actors are needed to develop and diffuse deep decarbonisation technologies. This makes wise policy design imperative. Policy-makers are confronted with a plethora of diverging views on which policies are preferable for a low carbon transition, and which interventions, such as R&D funding, information, environmental taxes, or bans, should be employed to achieve necessary and sufficient technological transformation. Focusing on market and technological investment risks, we offer a conceptual framework that explains why no silver bullet policy or single theoretical approach exists in regard to decarbonisation. Our framework highlights that policies need to be designed with these risks in mind and aids in the key task of matching problems and policies, thereby also facilitating judicious use of resources to optimise climate benefits from resources spent.
Highlights
Reaching the climate targets of the Paris Agreement (2 or 1,5 degrees above preindustrial limits) [1] is imperative to keep the risk of severely disruptive climate change at an acceptable level
As long as technologies necessary for a transition to a low-carbon economy face competition from cheaper, carbon-intensive alternatives, and consumers are unwilling to pay a sufficient premium for the transitional technologies, the market will not achieve the necessary transition on its own
We argue that a key reason for this is that successful selection and implementation of policy require an understanding of the challenges inhibiting transition in individual sectors, what types of risks that prevent investors from successfully developing and deploying low carbon technologies
Summary
Reaching the climate targets of the Paris Agreement (2 or 1,5 degrees above preindustrial limits) [1] is imperative to keep the risk of severely disruptive climate change at an acceptable level. As long as technologies necessary for a transition to a low-carbon economy face competition from cheaper, carbon-intensive alternatives, and consumers are unwilling to pay a sufficient premium for the transitional technologies, the market will not achieve the necessary transition on its own While such market risk constitutes an important obstacle to achieving transition, there are problematic risks relating to the development and deployment of technologies, which can impede transition independent of market conditions. We argue that a key reason for this is that successful selection and implementation of policy require an understanding of the challenges inhibiting transition in individual sectors, what types of risks that prevent investors from successfully developing and deploying low carbon technologies. We offer policy-makers and researchers engaged in climate policy and governance a much-needed tool for identifying situations that require more costly or otherwise far-reaching public interventions, as well as those expected to produce favorable outcomes with less resources or more light-handed measures
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