The main tools for developing climate-friendly technologies should be those that encourage the market to make good choices more generally: pricing carbon emissions and other environmental damages, removing distorting subsidies and barriers to competition, and supporting research and development broadly.
That is the assertion of RFF Senior Fellow Carolyn Fischer in "The Role of Technology Policies in Climate Mitigation," an RFF Issue Brief that suggests ways to bring about clean-energy advances.
"The most important technology-neutral policy and the core of any cost-effective approach must be a strong and increasing price signal across the entire economy that carbon emissions are costly," Fischer writes. Emissions pricing can be implemented either through a carbon tax or a broad-based cap-and-trade system, she notes, but there are strong arguments for a primary reliance on carbon pricing.
|First, technologies are only useful if people want to use them, and financial self-interest is the primary driver for most participants in a market economy. "Carbon pricing makes clean technologies more cost-competitive and provides 'market pull' by encouraging their adoption," says Fischer.
Second, many options are available for reducing emissions. There is a huge array of technological solutions for electricity generation, production processes, building materials, and consumer appliances. "No command-and-control regulation could efficiently prescribe all the appropriate activities that should be undertaken," Fischer says. "Carbon pricing, on the other hand, creates incentives to do all these things: use less carbon-intensive fuels and products, conserve energy, and develop and deploy emissions-reducing technologies."
While necessary, emissions pricing alone is not sufficient for supporting the scale of technology development and deployment that is needed. Appropriate technology policies are needed to complement the price signals, among them such approaches as tougher building codes and energy efficiency standards, prizes for technical innovation, directed research in publicly funded laboratories, and international technology partnerships. "Priority should be given to policies that enhance overall economic efficiency – broad R&D support, removing distortions, addressing regulatory barriers, reducing tax burdens, improving information, and supporting fundamental research," says Fischer.