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The Role of Sustainable Investment in Climate Policy

Author

Listed:
  • Franziska Schütze

    (Global Climate Forum, 10178 Berlin, Germany)

  • Steffen Fürst

    (Global Climate Forum, 10178 Berlin, Germany)

  • Jahel Mielke

    (Global Climate Forum, 10178 Berlin, Germany
    Faculty of Economics and Social Sciences, University of Potsdam, 14469 Potsdam, Germany)

  • Gesine A. Steudle

    (Global Climate Forum, 10178 Berlin, Germany)

  • Sarah Wolf

    (Global Climate Forum, 10178 Berlin, Germany)

  • Carlo C. Jaeger

    (Global Climate Forum, 10178 Berlin, Germany
    State Key Laboratory of Earth Surface Processes and Resource Ecology, Beijing Normal University, Beijing 100875, China
    School of Sustainability, Arizona State University, Tempe, AZ 85287, USA)

Abstract

Reaching the Sustainable Development Goals requires a fundamental socio-economic transformation accompanied by substantial investment in low-carbon infrastructure. Such a sustainability transition represents a non-marginal change, driven by behavioral factors and systemic interactions. However, typical economic models used to assess a sustainability transition focus on marginal changes around a local optimum, which—by construction—lead to negative effects. Thus, these models do not allow evaluating a sustainability transition that might have substantial positive effects. This paper examines which mechanisms need to be included in a standard computable general equilibrium model to overcome these limitations and to give a more comprehensive view of the effects of climate change mitigation. Simulation results show that, given an ambitious greenhouse gas emission constraint and a price of carbon, positive economic effects are possible if (1) technical progress results (partly) endogenously from the model and (2) a policy intervention triggering an increase of investment is introduced. Additionally, if (3) the investment behavior of firms is influenced by their sales expectations, the effects are amplified. The results provide suggestions for policy-makers, because the outcome indicates that investment-oriented climate policies can lead to more desirable outcomes in economic, social and environmental terms.

Suggested Citation

  • Franziska Schütze & Steffen Fürst & Jahel Mielke & Gesine A. Steudle & Sarah Wolf & Carlo C. Jaeger, 2017. "The Role of Sustainable Investment in Climate Policy," Sustainability, MDPI, vol. 9(12), pages 1-19, December.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:12:p:2221-:d:121170
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    Cited by:

    1. Kengo Suzuki & Ryohei Ishiwata, 2022. "Impact of a Carbon Tax on Energy Transition in a Deregulated Market: A Game-Based Experimental Approach," Sustainability, MDPI, vol. 14(19), pages 1-19, October.
    2. Sarah Wolf & Jonas Teitge & Jahel Mielke & Franziska Schütze & Carlo Jaeger, 2021. "The European Green Deal — More Than Climate Neutrality," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(2), pages 99-107, March.
    3. Luan Santos & Rafael Garaffa & André F. P. Lucena & Alexandre Szklo, 2018. "Impacts of Carbon Pricing on Brazilian Industry: Domestic Vulnerability and International Trade Exposure," Sustainability, MDPI, vol. 10(7), pages 1-19, July.

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