Systematic review of the outcomes and trade-offs of ten types of decarbonization policy instruments

Abstract

The literature evaluating the technical and socioeconomic outcomes of policy instruments used to support the transition to low-carbon economies is neither easily accessible nor comparable and often provides conflicting results. We develop and implement a framework to systematically review and synthesize the impact of ten types of decarbonization policy instruments on seven technical and socioeconomic outcomes. Our systematic review shows that the selected types of regulatory and economic and financial instruments are generally associated with positive impacts on environmental, technological and innovation outcomes. Several instruments are often associated with short-term negative impacts on competitiveness and distributional outcomes. We discuss how these trade-offs can be reduced or transformed into co-benefits by designing research and development and government procurement, deployment policies, carbon pricing and trading. We show how specific design features can promote competitiveness and reduce negative distributional impacts, particularly for small firms. An online interactive Decarbonisation Policy Evaluation Tool allows further analysis of the evidence. Ambitious policy instruments are needed to support the transition to low-carbon economies. This systematic review identifies what we know about positive and negative impacts of ten selected instruments on environmental, technological and socioeconomic outcomes, and how to minimize negative impacts.