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How Should Support for Climate-Friendly Technologies Be Designed?


Stabilizing global greenhouse gas concentrations at levels to avoid significant climate risks will require massive “decarbonization” of all the major economies over the next few decades, in addition to the reduced emissions from other GHGs and carbon sequestration. Achieving the necessary scale of emissions reductions will require a multifaceted policy effort to support a broad array of technological and behavioral changes. Change on this scale will require sound, well-thought-out strategies. In this article, we outline some core principles, drawn from recent social science research, for guiding the design of clean technology policies, with a focus on energy. The market should be encouraged to make good choices: pricing carbon emissions and other environmental damage, removing distorting subsidies and barriers to competition, and supporting RD&D broadly. More specific policies are required to address particular market failures and barriers. For those technologies identified as being particularly desirable, some narrower RD&D policies are available.

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  1. For a broader discussion of the interaction among emissions pricing, spillovers, and public support for environmentally friendly technologies, see Fischer (2008).

  2. Fischer and Newell (2008) show that, even with knowledge spillovers, policy cost-effectiveness depends largely on the degree to which all options for reducing emissions are encouraged. While emissions pricing is the single most effective policy, an optimal portfolio also includes RD&D support, achieving emissions reductions at significantly lower cost than any single policy.

  3. Many of these subsidies take the form of preferential tax treatment, relative to other sectors. The oil and gas industries in the United States and Canada have benefited from such provisions as accelerated depreciation, the expensing of exploration and development costs, and other investment tax breaks; direct expenditures on infrastructure and RD&D; and the incomplete capture of resource rents through royalties—many of which disproportionately support the development of the relatively dirty oil sands (Taylor et al. 2005).

  4. See, for example, Jones and Williams (1998).

  5. In this regard, an opportunity cost is associated with government RD&D spending, since this money could be spent in other areas, where spillover effects could be equally large or larger.

  6. For a discussion of technology-oriented agreements, see de Coninck et al. (2008).

  7. See also Popp (2011) for insights into technology transfer policies.

  8. Researchers from other disciplines are commonly more in favor of supporting specific technologies than are economists. One example is Azar and Sandén (2011), who argue that a fully technology-neutral policy neither exists nor would be desirable when the aim is to achieve a large-scale transition of the global energy system. Instead, technology policies should be openly debated in society.

  9. An example is the Ontario Centres of Excellence, which operate somewhat like a publicly funded venture capital firm.


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We gratefully acknowledge financial support from the Mistra Foundation’s Climate Policy Research Program (Clipore). Thanks also to two anonymous referees for their valuable comments. This article expands upon an earlier issue brief, Fischer (2009).

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Correspondence to Carolyn Fischer.

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Fischer, C., Torvanger, A., Shrivastava, M.K. et al. How Should Support for Climate-Friendly Technologies Be Designed?. Ambio 41, 33–45 (2012).

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  • Climate-friendly technologies
  • Carbon pricing
  • Technology policies
  • Barriers