Technology - An Introduction to Climate Change Legislation

An Introduction to Climate Change Legislation


An adequate response to the risks posed by climate change will require the development and deployment of new low- and zero-carbon technologies. Policies that impose a price on greenhouse gas emissions - such as a carbon tax or cap-and-trade program - would induce technological change and help move these new technologies into the marketplace. The private incentives to invest in R&D, even in the presence of an emissions mitigation policy, will still be weak because of the "public good" nature of new ideas: creating knowledge through R&D generates benefits that the innovator cannot fully appropriate.

There may also be a lack of confidence - particularly in the initial years of a new program - in the long-term government commitment to emissions pricing. Under these circumstances, government support for basic science can yield quite substantial returns on the investment, especially after accounting for positive spillovers of knowledge creation and pollution mitigation. The public policy rationale for commercial and near-commercial technologies - such as through pilot and demonstration projects - is much weaker. Private firms (or consortiums of firms) have substantial incentives to invest in demonstration projects, and the prospect of public funding may crowd out private investment. A climate-oriented R&D policy can address these market failures and will complement mitigation policy, a task more easily achieved through research and development rather than demonstration and deployment.

Further Readings

What's the Best Way to Promote Green Power? Don't Forget the Emissions Price
Carolyn Fischer and Richard G. Newell
Resources, Summer 2008 

Inducing Innovation for Climate Change Mitigation
Richard G. Newell
Weekly Policy Commentary, February 11, 2008

Climate Technology Deployment Policy
Richard G. Newell
Assessing U.S. Climate Policy Options
Issue Brief #10

Climate Technology Research, Development, and Demonstration: Funding Sources, Institutions, and Instruments
Richard G. Newell
Assessing U.S. Climate Policy Options
Issue Brief #9

A Tale of Two Market Failures: Technology and Environmental Policy
Adam B. Jaffe, Richard G. Newell, Robert N. Stavins
Issue Brief 04-38


CoverageAllowance AllocationCost Containment

Link to Assessing US Climate Policy Options 

Link to climate change bills and targets
Key elements and
targets of Climate
Change Bills Introduced
in the 111th Congress 

Emission Allowance Allocations Under The American Power (Kerry-Lieberman) Act (.xls)