Robust incentives and the design of a climate change governance regime
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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bürer, Mary Jean & Wüstenhagen, Rolf, 2009. "Which renewable energy policy is a venture capitalist's best friend? Empirical evidence from a survey of international cleantech investors," Energy Policy, Elsevier, vol. 37(12), pages 4997-5006, December.
- Karl E. Knapp, 1999. "Exploring Energy Technology Substitution for Reducing Atmospheric Carbon Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 121-143.
- Yang, Ming & Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom, 2008. "Evaluating the power investment options with uncertainty in climate policy," Energy Economics, Elsevier, vol. 30(4), pages 1933-1950, July.
- Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Credible Carbon Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 438-450.
- Maruyama, Naoko & Eckelman, Matthew J., 2009. "Long-term trends of electric efficiencies in electricity generation in developing countries," Energy Policy, Elsevier, vol. 37(5), pages 1678-1686, May.
- Meijer, Ineke S.M. & Hekkert, Marko P. & Koppenjan, Joop F.M., 2007. "The influence of perceived uncertainty on entrepreneurial action in emerging renewable energy technology; biomass gasification projects in the Netherlands," Energy Policy, Elsevier, vol. 35(11), pages 5836-5854, November.
- Graus, Wina & Worrell, Ernst, 2009. "Trend in efficiency and capacity of fossil power generation in the EU," Energy Policy, Elsevier, vol. 37(6), pages 2147-2160, June.
- Nemet, Gregory F., 2009. "Demand-pull, technology-push, and government-led incentives for non-incremental technical change," Research Policy, Elsevier, vol. 38(5), pages 700-709, June.
- de Coninck, Heleen & Fischer, Carolyn & Newell, Richard G. & Ueno, Takahiro, 2008. "International technology-oriented agreements to address climate change," Energy Policy, Elsevier, vol. 36(1), pages 335-356, January.
- Blyth, William & Bunn, Derek & Kettunen, Janne & Wilson, Tom, 2009. "Policy interactions, risk and price formation in carbon markets," Energy Policy, Elsevier, vol. 37(12), pages 5192-5207, December.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
- Webster, Mort & Paltsev, Sergey & Reilly, John, 2010. "The hedge value of international emissions trading under uncertainty," Energy Policy, Elsevier, vol. 38(4), pages 1787-1796, April.
- Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, vol. 67, pages 297.
- Nemet, Gregory F., 2009. "Interim monitoring of cost dynamics for publicly supported energy technologies," Energy Policy, Elsevier, vol. 37(3), pages 825-835, March.
When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:38:y:2010:i:11:p:7216-7225. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.