Near-term technology policies for long-term climate targets—economy wide versus technology specific approaches

Abstract

The aim of this paper is to offer suggestions when it comes to near-term technology policies for long-term climate targets based on some insights into the nature of technical change. We make a distinction between economy wide and technology specific policy instruments and put forward two key hypotheses: (i) Near-term carbon targets such as the Kyoto protocol can be met by economy wide price instruments (carbon taxes, or a cap-and-trade system) changing the technologies we pick from the shelf (higher energy efficiency in cars, buildings and industry, wind, biomass for heat and electricity, natural gas instead of coal, solar thermal, etc.). (ii) Technology specific policies are needed to bring new technologies to the shelf. Without these new technologies, stricter emission reduction targets may be considered impossible to meet by the government, industry and the general public, and therefore not adopted. The policies required to bring these more advanced technologies to the shelf are more complex and include increased public research and development, demonstration, niche market creation, support for networks within the new industries, standard settings and infrastructure policies (e.g., when it comes to hydrogen distribution). There is a risk that the society in its quest for cost-efficiency in meeting near-term emissions targets, becomes blindfolded when it comes to the more difficult, but equally important issue of bringing more advanced technologies to the shelf. The paper presents mechanisms that cause technology look in, how these very mechanisms can be used to get out of the current “carbon lock-in” and the risk with premature lock-ins into new technologies that do not deliver what they currently promise. We then review certain climate policy proposals with regards to their expected technology impact, and finally we present a let-a-hundred-flowers-bloom strategy for the next couple of decades.