The effect of carbon pricing on technological change for full energy decarbonization: A review of empirical ex-post evidence

Lilliestam J, Patt A, Bersalli G (2021)

Publication Type: Journal article, Review article

Publication year: 2021

Journal

WIREs Climate Change John Wiley & Sons Inc.

Book Volume: 12

Article Number: e681

Journal Issue: 1

DOI: 10.1002/wcc.681

Abstract

In order to achieve the temperature goals of the Paris Agreement, the world must reach net-zero carbon emissions around mid-century, which calls for an entirely new energy system. Carbon pricing, in the shape of taxes or emissions trading schemes, is often seen as the main, or only, necessary climate policy instrument, based on theoretical expectations that this would promote innovation and diffusion of the new technologies necessary for full decarbonization. Here, we review the empirical knowledge available in academic ex-post analyses of the effectiveness of existing, comparatively high-price carbon pricing schemes in the European Union, New Zealand, British Columbia, and the Nordic countries. Some articles find short-term operational effects, especially fuel switching in existing assets, but no article finds mentionable effects on technological change. Critically, all articles examining the effects on zero-carbon investment found that existing carbon pricing scheme have had no effect at all. We conclude that the effectiveness of carbon pricing in stimulating innovation and zero-carbon investment remains a theoretical argument. So far, there is no empirical evidence of its effectiveness in promoting the technological change necessary for full decarbonization. This article is categorized under: Climate Economics > Economics of Mitigation.

Authors with CRIS profile

Johan Lilliestam

Additional Organisation(s)

Lehrstuhl für Sustainability Transition Policy

Involved external institutions

Universität Potsdam DE Germany (DE) Eidgenössische Technische Hochschule Zürich (ETHZ) / Swiss Federal Institute of Technology in Zurich CH Switzerland (CH)

How to cite

APA:

Lilliestam, J., Patt, A., & Bersalli, G. (2021). The effect of carbon pricing on technological change for full energy decarbonization: A review of empirical ex-post evidence. WIREs Climate Change, 12(1). https://doi.org/10.1002/wcc.681

MLA:

Lilliestam, Johan, Anthony Patt, and Germán Bersalli. "The effect of carbon pricing on technological change for full energy decarbonization: A review of empirical ex-post evidence." WIREs Climate Change 12.1 (2021).

BibTeX: Download