A Net-Zero Target Compels a Backward Induction Approach to Climate Policy

This article, published in Nature Climate Change, explores the importance of credibility in climate policy.

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Sept. 18, 2023


Journal Article in Nature Climate Change

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1 minute


Jurisdictions worldwide increasingly affirm their contributions to the Paris Agreement by pledging net-zero targets. We argue that delivering on net-zero targets compels a backward induction approach to climate policy, which stipulates that maximizing credibility should be the objective of policy pathways design. This implies choosing policies that strike a suitable balance between building commitment and attaining cost efficiency. Our argument rests on the premise that private investments play a key role for net zero, and that getting expectations right—through credible commitment to a policy pathway—is more relevant than getting the prices right to align the investments with net zero. We sketch the main elements for a regulatory strategy to put this approach into action.


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