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Effectiveness of environmental policies in triggering a transition to low carbon technologies

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EMbeDS researchers Francesco Lamperti and Andrea Roventini, together with Mauro Napoletano (OFCE-Sciences Po, SKEMA Business School), published a study in Macroecononomic Dynamics on the effectiveness of environmental policies for triggering a transition to low carbon technologies.

The authors compare market-based instruments (e.g., taxes and subsidies) to command-and-control regulation. They find that the former suffer from path dependence and exhibit a bounded window of opportunity; delays in their implementation reduce the chances to redirect technical change (i.e. triggering a transition toward clean energy) and avoid environmental catastrophes. On the contrary, command-and-control interventions are favored by path dependence and guarantee policy effectiveness irrespectively of the timing of their introduction. Thus, the study supports the notion that regulation on quantities should gain more consideration in the design of environmental and climate policies. The article can be found at the site of Macroeconomic Dynamics.