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The 'Dark Matter' in the Search for Sustainable Growth: Energy, Innovation and the Financially Paradoxical Role of Climate Confidence

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  • Jean-Charles Hourcade

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Michael Grubb

    (UK Government AdvisorUK - Royal Institute of International Affairs)

  • Aurélie Méjean

    () (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Theories of economic growth have long recognised that innovation is a key but poorly understood force – the 'residual' of neoclassical growth models. These models have no representation of intermediate goods, or of the factors that generate and diffuse innovations, including learning-by-doing and scale economies; they are thus unable to picture how a suite of economic and institutional changes triggers waves of long-term economic progress, which in practice has been the long-term historical pattern. The absence of finance in these models is particularly problematic. The centrality of financial structures to understanding patterns of economic growth is acute concerning policies to shape efficiency, innovation and infrastructure in ways compatible with energy and climate security, since these require substantial upfront investment. However, uncertainty and a lack of confidence deter such investment. Environmental policy could reduce risk and thereby shape ultimately profitable investments. The paper outlines deep relationships between energy/carbon-related finance and wider debates about financial systems after the crisis. The paper finally proposes an agenda for future

Suggested Citation

  • Jean-Charles Hourcade & Michael Grubb & Aurélie Méjean, 2015. "The 'Dark Matter' in the Search for Sustainable Growth: Energy, Innovation and the Financially Paradoxical Role of Climate Confidence," Post-Print hal-01646242, HAL.
  • Handle: RePEc:hal:journl:hal-01646242
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01646242
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    References listed on IDEAS

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