Publication Type

A reform strategy to transform energy: From piecemeal to systemwide change

Working Papers 22-13

Body

The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report on Climate Change Mitigation highlights the vast gap between climate change mitigation actions and climate stabilization goals. But its broad policy prescriptions are likely to leave policymakers pondering what specific actions to take. Informed by accumulating evidence on transforming aspects of energy systems like power generation from solar and wind resources and battery electric cars, this paper develops a more pointed energy reform strategy than that of the IPCC to deliver the necessary systemwide changes. It makes the case for two unorthodox policies. One is for governments to provide, in addition to R&D supports, market-creating supports for early deployment of low-carbon technologies in initial markets. The second is to sequence emissions pricing after innovation and market-creating supports and differentiate this pricing across key energy sectors rather than imposing one economywide price. Compared with a single price, targeting higher emissions pricing on sectors that are costlier to decarbonize still promotes cost-effective emission cuts but limits adverse distributional impacts. The paper also considers nonprice barriers to change and ways to coordinate domestic reforms across countries.

More From

More on This Topic

Working Papers

Green innovation and the transition toward a clean economy

Daron Acemoglu (Massachusetts Institute of Technology), Philippe Aghion (Collège de France; INSEAD; London School of Economics and Political Science), Lint Barrage (ETH Zurich ) and David Hémous (University of Zurich )