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Reframing incentives for climate policy action

Author

Listed:
  • J.-F. Mercure

    (University of Exeter
    University of Cambridge
    Cambridge Econometrics)

  • P. Salas

    (University of Cambridge
    University of Cambridge Institute for Sustainability Leadership (CISL))

  • P. Vercoulen

    (University of Exeter
    Cambridge Econometrics)

  • G. Semieniuk

    (University of Massachusetts Amherst
    SOAS University of London)

  • A. Lam

    (University of Cambridge
    University of Macao)

  • H. Pollitt

    (University of Cambridge
    Cambridge Econometrics)

  • P. B. Holden

    (The Open University)

  • N. Vakilifard

    (The Open University)

  • U. Chewpreecha

    (Cambridge Econometrics)

  • N. R. Edwards

    (University of Cambridge
    The Open University)

  • J. E. Vinuales

    (University of Cambridge)

Abstract

A key aim of climate policy is to progressively substitute renewables and energy efficiency for fossil fuel use. The associated rapid depreciation and replacement of fossil-fuel-related physical and natural capital entail a profound reorganization of industry value chains, international trade and geopolitics. Here we present evidence confirming that the transformation of energy systems is well under way, and we explore the economic and strategic implications of the emerging energy geography. We show specifically that, given the economic implications of the ongoing energy transformation, the framing of climate policy as economically detrimental to those pursuing it is a poor description of strategic incentives. Instead, a new climate policy incentives configuration emerges in which fossil fuel importers are better off decarbonizing, competitive fossil fuel exporters are better off flooding markets and uncompetitive fossil fuel producers—rather than benefitting from ‘free-riding’—suffer from their exposure to stranded assets and lack of investment in decarbonization technologies.

Suggested Citation

  • J.-F. Mercure & P. Salas & P. Vercoulen & G. Semieniuk & A. Lam & H. Pollitt & P. B. Holden & N. Vakilifard & U. Chewpreecha & N. R. Edwards & J. E. Vinuales, 2021. "Reframing incentives for climate policy action," Nature Energy, Nature, vol. 6(12), pages 1133-1143, December.
    • Handle: RePEc:nat:natene:v:6:y:2021:i:12:d:10.1038_s41560-021-00934-2
    DOI: 10.1038/s41560-021-00934-2
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    References listed on IDEAS

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    3. Kemfert, Claudia & Präger, Fabian & Braunger, Isabell & Hoffart, Franziska M. & Brauers, Hanna, 2022. "The expansion of natural gas infrastructure puts energy transitions at risk," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7, pages 582-587.
    4. Odenweller, Adrian, 2022. "Climate mitigation under S-shaped energy technology diffusion: Leveraging synergies of optimisation and simulation models," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    5. Wang, Kai-Hua & Kan, Jia-Min & Qiu, Lianhong & Xu, Shulin, 2023. "Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 256-272.
    6. Kamila Svobodova & John R. Owen & Deanna Kemp & Vítězslav Moudrý & Éléonore Lèbre & Martin Stringer & Benjamin K. Sovacool, 2022. "Decarbonization, population disruption and resource inventories in the global energy transition," Nature Communications, Nature, vol. 13(1), pages 1-16, December.
    7. Sasse, Jan-Philipp & Trutnevyte, Evelina, 2023. "Cost-effective options and regional interdependencies of reaching a low-carbon European electricity system in 2035," Energy, Elsevier, vol. 282(C).
    8. Mr. Tobias Adrian & Mr. Patrick Bolton & Alissa M. Kleinnijenhuis, 2022. "The Great Carbon Arbitrage," IMF Working Papers 2022/107, International Monetary Fund.
    9. Liang, Chao & Umar, Muhammad & Ma, Feng & Huynh, Toan L.D., 2022. "Climate policy uncertainty and world renewable energy index volatility forecasting," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    10. Wang, Kai & Hu, Lihong & Deng, Jun & Zhang, Yanni, 2023. "Multiscale thermal behavioral characterization of spontaneous combustion of pre-oxidized coal with different air exposure time," Energy, Elsevier, vol. 262(PA).
    11. Femke J. M. M. Nijsse & Jean-Francois Mercure & Nadia Ameli & Francesca Larosa & Sumit Kothari & Jamie Rickman & Pim Vercoulen & Hector Pollitt, 2023. "The momentum of the solar energy transition," Nature Communications, Nature, vol. 14(1), pages 1-10, December.
    12. de Moura, Fernanda Senra & Barbrook-Johnson, Peter, 2022. "Using data-driven systems mapping to contextualise complexity economics insights," INET Oxford Working Papers 2022-27, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    13. Zhang, Shuo & Yu, Yadong & Kharrazi, Ali & Ma, Tieju, 2023. "How would sustainable transformations in the electricity sector of megacities impact employment levels? A case study of Beijing," Energy, Elsevier, vol. 270(C).
    14. Haoyue Liang & Fengqi You, 2023. "Reshoring silicon photovoltaics manufacturing contributes to decarbonization and climate change mitigation," Nature Communications, Nature, vol. 14(1), pages 1-19, December.

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