Uncertainty management and the dynamic adjustment of deep decarbonization pathways

Abstract

Contrary to ‘static’ pathways that are defined once for all, this article deals with the need for policy makers to adopt a dynamic adaptive policy pathway for managing decarbonization over the period of implementation. When choosing a pathway as the most desirable option, it is important to keep in mind that each decarbonization option relies on the implementation of specific policies and instruments. Given structural, effectiveness, and timing uncertainties specific to each policy option, they may fail in delivering the expected outcomes in time. The possibility of diverging from an initial decarbonization trajectory to another one without incurring excessive costs should therefore be a strategic element in the design of an appropriate decarbonization strategy. The article relies on initial experiences in France and Germany on decarbonization planning and implementation to define elements for managing dynamic adjustment issues. Such an adaptive pathway strategy should combine long-lived incentives, like a pre-announced escalating carbon price, to form consistent expectations, as well as adaptive policies to improve overall robustness and resilience. We sketch key elements of a monitoring process based on an ex ante definition of leading indicators that should be assessed regularly and combined with signposts and trigger values at the subsector level.Policy relevanceThese research questions are of special interest and urgency following the Paris Agreement in 2015. It calls on all countries to monitor the implementation of their national contributions and review their ambition regularly. The regular revision of decarbonization pathways constitute a great research opportunity to gather experiences on decarbonization pathway implementation and on dynamic management issues to progress towards an operational dynamic adaptive policy pathway mechanism.