Clean-energy industry investment is the fastest way to tackle climate crisis

by Search Gate staff. Published Thu 10 Sep 2016 19:00
"Carrots buy sticks" in the race to decarbonise energy systems

Policymakers should invest in clean-energy industries rather than first penalising polluters if they are to speed up progress in tackling climate change, according to a new policy paper.

In the paper, a multidisciplinary team of environmental, political and legal experts at the University of California, Berkeley, finds that instead of emphasizing cap-and-trade schemes and penalties on greenhouse gas emissions - strategies considered to be most efficient by many economists - policymakers should begin by providing benefits through green industrial policies, such as subsidies and tax rebates.

The paper comes in advance of the United Nations Climate Change Conference, which will be held in Paris in December 2016.

"This paper is about how can we build political support for progress on climate policy, toward decarbonising our energy systems," said study lead author Jonas Meckling, an assistant professor in the Department of Environmental Science, Policy and Management. "We find that the more green industries form or expand, the stronger the coalitions for decarbonising energy systems become. This runs counter to the prevalent notion that pricing carbon is the first-best choice in climate policymaking."

The authors noted that while green industrial policy may appear less efficient economically, supporting clean energy builds political support down the line for carbon regulation, such as carbon prices, that imposes costs on polluting industries. In essence, carrots buy sticks.

"Basically, if you can build political support and speed up the process overall by using less efficient but more powerful tools up front, you may still lower the total costs in the long run," said co-author Nina Kelsey, a postdoctoral scholar at the Berkeley Roundtable on the International Economy.

The authors pointed to the precedence for this approach. Two-thirds of all countries and sub-national entities that adopted a carbon pricing policy - including climate leaders such as California, Denmark and Germany - previously implemented incentives for clean energy, thus building political support among green industry for de-carbonisation.

The authors suggest three key strategies for building winning coalitions for de-carbonisation. The first is to adopt targeted sector-specific policies, such as rebates and subsidies for renewable energy, that provide concrete benefits to firms and households.

The second recommendation is to focus on direct policy measures, such as renewable portfolio standards and feed-in tariffs, rather than broad, shallow ones. Such policies provide concentrated benefits to a few, but well-organized renewable energy firms and investors in low-carbon industries.

The order of these moves matter, the authors conclude. Getting buy-in from green industry will create constituencies that provide support for subsequent climate policy moves such as pricing carbon.

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