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Robust incentives and the design of a climate change governance regime

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  • Nemet, Gregory F.

Abstract

In building a governance regime to address climate change, should we prioritize the development of global institutions or national ones? This paper focuses on two neglected characteristics to inform the governance problem: the incentives for investment in low-carbon energy technology and the influence of historical policy volatility. Examining a case study of an important low-carbon energy technology, wind power, this study finds: (1) policy volatility has been substantial, (2) policy changes were uncorrelated across jurisdictions, suggesting that (3) investors could have substantially reduced their exposure to the risk of policy volatility by operating globally. While it also has downsides, a poorly coordinated international policy regime has the advantage of reducing the risk associated with a global policy failure. Beyond this case study, the importance of this positive effect depends on: the probability of policy failures in each country, the correlations among them, and the probability of a global policy failure.

Suggested Citation

  • Nemet, Gregory F., 2010. "Robust incentives and the design of a climate change governance regime," Energy Policy, Elsevier, vol. 38(11), pages 7216-7225, November.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:11:p:7216-7225
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    References listed on IDEAS

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    Cited by:

    1. Nemet, Gregory F., 2012. "Inter-technology knowledge spillovers for energy technologies," Energy Economics, Elsevier, vol. 34(5), pages 1259-1270.
    2. Sterlacchini, Alessandro, 2012. "Energy R&D in private and state-owned utilities: An analysis of the major world electric companies," Energy Policy, Elsevier, vol. 41(C), pages 494-506.
    3. Gregory F. Nemet & Martina Kraus & Vera Zipperer, 2016. "The Valley of Death, the Technology Pork Barrel, and Public Support for Large Demonstration Projects," Discussion Papers of DIW Berlin 1601, DIW Berlin, German Institute for Economic Research.
    4. Baccini, Leonardo & Urpelainen, Johannes, 2012. "Legislative fractionalization and partisan shifts to the left increase the volatility of public energy R&D expenditures," LSE Research Online Documents on Economics 45571, London School of Economics and Political Science, LSE Library.
    5. Gregory F. Nemet & Peter Braden & Ed Cubero & Bickey Rimal, 2014. "Four decades of multiyear targets in energy policy: aspirations or credible commitments?," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 3(5), pages 522-533, September.
    6. Baccini, Leonardo & Urpelainen, Johannes, 2012. "Legislative fractionalization and partisan shifts to the left increase the volatility of public energy R&D expenditures," Energy Policy, Elsevier, vol. 46(C), pages 49-57.
    7. repec:ula:econom:v:42:y:2017:i:44:p:11-36 is not listed on IDEAS
    8. Holburn, Guy L.F., 2012. "Assessing and managing regulatory risk in renewable energy: Contrasts between Canada and the United States," Energy Policy, Elsevier, vol. 45(C), pages 654-665.

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