Do national-level policies to promote low-carbon technology deployment pay off for the investor countries?

Abstract

National-level policies to promote deployment of low-carbon technologies have been suggested and used as a means to reduce greenhouse gas emissions in the context of international climate change mitigation. The long-term benefits of such policies in the context of international climate change mitigation depend on their effects on near-term emissions abatement and resultant long-term technological change that will reduce abatement costs of achieving global mitigation goals. There is also an argument that these policies might foster early-mover advantages in international low-carbon technology markets. We first review the factors that could influence such benefits and use a global integrated assessment model to present an illustrative example to understand the potential magnitude of these benefits. We find that reductions in long-term abatement costs might not provide sufficient incentives to justify policies to promote the deployment of low-carbon technologies, in particular, the emerging, higher-risk, and currently expensive alternatives. We also find that early-mover advantages can potentially provide substantial benefits, but only if these advantages are both strong and persistent. Our results suggest a role for international cooperation in low-carbon technology deployment to address the existence of free-riding opportunities in the context of global climate change mitigation.