IDEAS home Printed from https://ideas.repec.org/a/nat/natene/v6y2021i12d10.1038_s41560-021-00934-2.html
   My bibliography  Save this article

Reframing incentives for climate policy action

Author

Listed:
  • J.-F. Mercure

    (University of Exeter
    University of Cambridge
    Cambridge Econometrics)

  • P. Salas

    (University of Cambridge
    University of Cambridge Institute for Sustainability Leadership (CISL))

  • P. Vercoulen

    (University of Exeter
    Cambridge Econometrics)

  • G. Semieniuk

    (University of Massachusetts Amherst
    SOAS University of London)

  • A. Lam

    (University of Cambridge
    University of Macao)

  • H. Pollitt

    (University of Cambridge
    Cambridge Econometrics)

  • P. B. Holden

    (The Open University)

  • N. Vakilifard

    (The Open University)

  • U. Chewpreecha

    (Cambridge Econometrics)

  • N. R. Edwards

    (University of Cambridge
    The Open University)

  • J. E. Vinuales

    (University of Cambridge)

Abstract

A key aim of climate policy is to progressively substitute renewables and energy efficiency for fossil fuel use. The associated rapid depreciation and replacement of fossil-fuel-related physical and natural capital entail a profound reorganization of industry value chains, international trade and geopolitics. Here we present evidence confirming that the transformation of energy systems is well under way, and we explore the economic and strategic implications of the emerging energy geography. We show specifically that, given the economic implications of the ongoing energy transformation, the framing of climate policy as economically detrimental to those pursuing it is a poor description of strategic incentives. Instead, a new climate policy incentives configuration emerges in which fossil fuel importers are better off decarbonizing, competitive fossil fuel exporters are better off flooding markets and uncompetitive fossil fuel producers—rather than benefitting from ‘free-riding’—suffer from their exposure to stranded assets and lack of investment in decarbonization technologies.

Suggested Citation

  • J.-F. Mercure & P. Salas & P. Vercoulen & G. Semieniuk & A. Lam & H. Pollitt & P. B. Holden & N. Vakilifard & U. Chewpreecha & N. R. Edwards & J. E. Vinuales, 2021. "Reframing incentives for climate policy action," Nature Energy, Nature, vol. 6(12), pages 1133-1143, December.
    • Handle: RePEc:nat:natene:v:6:y:2021:i:12:d:10.1038_s41560-021-00934-2
    DOI: 10.1038/s41560-021-00934-2
    as

    Download full text from publisher

    File URL: https://www.nature.com/articles/s41560-021-00934-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1038/s41560-021-00934-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. P. B. Holden & N. R. Edwards & A. Ridgwell & R. D. Wilkinson & K. Fraedrich & F. Lunkeit & H. Pollitt & J.-F. Mercure & P. Salas & A. Lam & F. Knobloch & U. Chewpreecha & J. E. Viñuales, 2018. "Climate–carbon cycle uncertainties and the Paris Agreement," Nature Climate Change, Nature, vol. 8(7), pages 609-613, July.
    2. David L. McCollum & Wenji Zhou & Christoph Bertram & Harmen-Sytze Boer & Valentina Bosetti & Sebastian Busch & Jacques Després & Laurent Drouet & Johannes Emmerling & Marianne Fay & Oliver Fricko & Sh, 2018. "Author Correction: Energy investment needs for fulfilling the Paris Agreement and achieving the Sustainable Development Goals," Nature Energy, Nature, vol. 3(8), pages 699-699, August.
    3. Detlef P. van Vuuren & Elke Stehfest & David E. H. J. Gernaat & Maarten Berg & David L. Bijl & Harmen Sytze Boer & Vassilis Daioglou & Jonathan C. Doelman & Oreane Y. Edelenbosch & Mathijs Harmsen & A, 2018. "Alternative pathways to the 1.5 °C target reduce the need for negative emission technologies," Nature Climate Change, Nature, vol. 8(5), pages 391-397, May.
    4. D. P. van Vuuren & Kaj-Ivar Wijst & Stijn Marsman & Maarten Berg & Andries F. Hof & Chris D. Jones, 2020. "The costs of achieving climate targets and the sources of uncertainty," Nature Climate Change, Nature, vol. 10(4), pages 329-334, April.
    5. David L. McCollum & Wenji Zhou & Christoph Bertram & Harmen-Sytze Boer & Valentina Bosetti & Sebastian Busch & Jacques Després & Laurent Drouet & Johannes Emmerling & Marianne Fay & Oliver Fricko & Sh, 2018. "Energy investment needs for fulfilling the Paris Agreement and achieving the Sustainable Development Goals," Nature Energy, Nature, vol. 3(7), pages 589-599, July.
    6. P. B. Holden & N. R. Edwards & A. Ridgwell & R. D. Wilkinson & K. Fraedrich & F. Lunkeit & H. Pollitt & J.-F. Mercure & P. Salas & A. Lam & F. Knobloch & U. Chewpreecha & J. E. Viñuales, 2018. "Author Correction: Climate–carbon cycle uncertainties and the Paris Agreement," Nature Climate Change, Nature, vol. 8(10), pages 921-921, October.
    7. Joeri Rogelj & Alexander Popp & Katherine V. Calvin & Gunnar Luderer & Johannes Emmerling & David Gernaat & Shinichiro Fujimori & Jessica Strefler & Tomoko Hasegawa & Giacomo Marangoni & Volker Krey &, 2018. "Scenarios towards limiting global mean temperature increase below 1.5 °C," Nature Climate Change, Nature, vol. 8(4), pages 325-332, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hoffart, Franziska, 2022. "What is a feasible and 1.5°C-aligned hydrogen infrastructure for Germany? A multi-criteria economic study based on socio-technical energy scenarios," Ruhr Economic Papers 979, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Pavlović, Boban & Ivezić, Dejan & Živković, Marija, 2022. "Transition pathways of household heating in Serbia: Analysis based on an agent-based model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 163(C).
    3. Kemfert, Claudia & Präger, Fabian & Braunger, Isabell & Hoffart, Franziska M. & Brauers, Hanna, 2022. "The expansion of natural gas infrastructure puts energy transitions at risk," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7, pages 582-587.
    4. Odenweller, Adrian, 2022. "Climate mitigation under S-shaped energy technology diffusion: Leveraging synergies of optimisation and simulation models," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    5. Wang, Kai-Hua & Kan, Jia-Min & Qiu, Lianhong & Xu, Shulin, 2023. "Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 256-272.
    6. Kamila Svobodova & John R. Owen & Deanna Kemp & Vítězslav Moudrý & Éléonore Lèbre & Martin Stringer & Benjamin K. Sovacool, 2022. "Decarbonization, population disruption and resource inventories in the global energy transition," Nature Communications, Nature, vol. 13(1), pages 1-16, December.
    7. Sasse, Jan-Philipp & Trutnevyte, Evelina, 2023. "Cost-effective options and regional interdependencies of reaching a low-carbon European electricity system in 2035," Energy, Elsevier, vol. 282(C).
    8. Mr. Tobias Adrian & Mr. Patrick Bolton & Alissa M. Kleinnijenhuis, 2022. "The Great Carbon Arbitrage," IMF Working Papers 2022/107, International Monetary Fund.
    9. Liang, Chao & Umar, Muhammad & Ma, Feng & Huynh, Toan L.D., 2022. "Climate policy uncertainty and world renewable energy index volatility forecasting," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    10. Wang, Kai & Hu, Lihong & Deng, Jun & Zhang, Yanni, 2023. "Multiscale thermal behavioral characterization of spontaneous combustion of pre-oxidized coal with different air exposure time," Energy, Elsevier, vol. 262(PA).
    11. Femke J. M. M. Nijsse & Jean-Francois Mercure & Nadia Ameli & Francesca Larosa & Sumit Kothari & Jamie Rickman & Pim Vercoulen & Hector Pollitt, 2023. "The momentum of the solar energy transition," Nature Communications, Nature, vol. 14(1), pages 1-10, December.
    12. Sun, Guanglin & Fang, Jiming & Li, Ting & Ai, Yongfang, 2024. "Effects of climate policy uncertainty on green innovation in Chinese enterprises," International Review of Financial Analysis, Elsevier, vol. 91(C).
    13. de Moura, Fernanda Senra & Barbrook-Johnson, Peter, 2022. "Using data-driven systems mapping to contextualise complexity economics insights," INET Oxford Working Papers 2022-27, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    14. Hoffart, Franziska M. & D'Orazio, Paola & Holz, Franziska & Kemfert, Claudia, 2024. "Exploring the interdependence of climate, finance, energy, and geopolitics: A conceptual framework for systemic risks amidst multiple crises," Applied Energy, Elsevier, vol. 361(C).
    15. Zhang, Shuo & Yu, Yadong & Kharrazi, Ali & Ma, Tieju, 2023. "How would sustainable transformations in the electricity sector of megacities impact employment levels? A case study of Beijing," Energy, Elsevier, vol. 270(C).
    16. Haoyue Liang & Fengqi You, 2023. "Reshoring silicon photovoltaics manufacturing contributes to decarbonization and climate change mitigation," Nature Communications, Nature, vol. 14(1), pages 1-19, December.
    17. Guo, Wen-Chung & Tseng, Ping-Lun, 2023. "COVID-19, bank risk, and capital regulation: The aggregate shock and social distancing," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 155-173.
    18. Nikas, Alexandros & Frilingou, Natasha & Heussaff, Conall & Fragkos, Panagiotis & Mittal, Shivika & Sampedro, Jon & Giarola, Sara & Sasse, Jan-Philipp & Rinaldi, Lorenzo & Doukas, Haris & Gambhir, Aja, 2024. "Three different directions in which the European Union could replace Russian natural gas," Energy, Elsevier, vol. 290(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregor Semieniuk & Emanuele Campiglio & Jean‐Francois Mercure & Ulrich Volz & Neil R. Edwards, 2021. "Low‐carbon transition risks for finance," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 12(1), January.
    2. Yang Ou & Christopher Roney & Jameel Alsalam & Katherine Calvin & Jared Creason & Jae Edmonds & Allen A. Fawcett & Page Kyle & Kanishka Narayan & Patrick O’Rourke & Pralit Patel & Shaun Ragnauth & Ste, 2021. "Deep mitigation of CO2 and non-CO2 greenhouse gases toward 1.5 °C and 2 °C futures," Nature Communications, Nature, vol. 12(1), pages 1-9, December.
    3. Fei Guo & Bas J. Ruijven & Behnam Zakeri & Shining Zhang & Xing Chen & Changyi Liu & Fang Yang & Volker Krey & Keywan Riahi & Han Huang & Yuanbing Zhou, 2022. "Implications of intercontinental renewable electricity trade for energy systems and emissions," Nature Energy, Nature, vol. 7(12), pages 1144-1156, December.
    4. Panos, Evangelos & Glynn, James & Kypreos, Socrates & Lehtilä, Antti & Yue, Xiufeng & Ó Gallachóir, Brian & Daniels, David & Dai, Hancheng, 2023. "Deep decarbonisation pathways of the energy system in times of unprecedented uncertainty in the energy sector," Energy Policy, Elsevier, vol. 180(C).
    5. Larissa Nogueira & Francesco Dalla Longa & Lara Aleluia Reis & Laurent Drouet & Zoi Vrontisi & Kostas Fragkiadakis & Evangelos Panos & Bob Zwaan, 2023. "A multi-model framework to assess the role of R&D towards a decarbonized energy system," Climatic Change, Springer, vol. 176(7), pages 1-22, July.
    6. Gumber, Anurag & Zana, Riccardo & Steffen, Bjarne, 2024. "A global analysis of renewable energy project commissioning timelines," Applied Energy, Elsevier, vol. 358(C).
    7. Ángel Galán-Martín & Daniel Vázquez & Selene Cobo & Niall Dowell & José Antonio Caballero & Gonzalo Guillén-Gosálbez, 2021. "Delaying carbon dioxide removal in the European Union puts climate targets at risk," Nature Communications, Nature, vol. 12(1), pages 1-12, December.
    8. Joëlle Noailly & Roger Smeets, 2022. "Financing Energy Innovation: Internal Finance and the Direction of Technical Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 145-169, September.
    9. Wu, Qingyang & Wang, Yanying, 2022. "How does carbon emission price stimulate enterprises' total factor productivity? Insights from China's emission trading scheme pilots," Energy Economics, Elsevier, vol. 109(C).
    10. Yu, Bolin & Fang, Debin & Xiao, Kun & Pan, Yuling, 2023. "Drivers of renewable energy penetration and its role in power sector's deep decarbonization towards carbon peak," Renewable and Sustainable Energy Reviews, Elsevier, vol. 178(C).
    11. Perdana, Sigit & Vielle, Marc, 2022. "Making the EU Carbon Border Adjustment Mechanism acceptable and climate friendly for least developed countries," Energy Policy, Elsevier, vol. 170(C).
    12. Qian Zhang & Christopher Kennedy & Tao Wang & Wendong Wei & Jiashuo Li & Lei Shi, 2020. "Transforming the coal and steel nexus for China's eco‐civilization: Interplay between rail and energy infrastructure," Journal of Industrial Ecology, Yale University, vol. 24(6), pages 1352-1363, December.
    13. Zohra Dradra & Chokri Abdennadher, 2023. "Modeling the effects of renewable energy on sustainable development: evidence from simultaneous equations models," Economic Change and Restructuring, Springer, vol. 56(4), pages 2111-2128, August.
    14. Liu, Haifeng & Ampah, Jeffrey Dankwa & Afrane, Sandylove & Adun, Humphrey & Jin, Chao & Yao, Mingfa, 2023. "Deployment of hydrogen in hard-to-abate transport sectors under limited carbon dioxide removal (CDR): Implications on global energy-land-water system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 184(C).
    15. Dafermos, Yannis & Nikolaidi, Maria, 2021. "How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis," Journal of Financial Stability, Elsevier, vol. 54(C).
    16. Laura Cavalli & Mia Alibegovic & Edward Cruickshank & Luca Farnia & Ilenia G. Romani, 2023. "The impact of EU Structural Funds on the national sustainable development strategy: a methodological application," Regional Studies, Regional Science, Taylor & Francis Journals, vol. 10(1), pages 52-69, December.
    17. Naoyuki Yoshino & Tim Schloesser & Farhad Taghizadeh‐Hesary, 2021. "Social funding of green financing: An application of distributed ledger technologies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6060-6073, October.
    18. Gong, Yu & Liu, Pan & Ming, Bo & Li, Dingfang, 2021. "Identifying the effect of forecast uncertainties on hybrid power system operation: A case study of Longyangxia hydro–photovoltaic plant in China," Renewable Energy, Elsevier, vol. 178(C), pages 1303-1321.
    19. Zhang, Mingming & Song, Wenwen & Liu, Liyun & Zhou, Dequn, 2024. "Optimal investment portfolio strategy for carbon neutrality of power enterprises," Renewable and Sustainable Energy Reviews, Elsevier, vol. 189(PA).
    20. Joelle Noailly; Roger Smeets, 2021. "Financing Energy Innovation: Internal Finance and the Direction of Technical Change," CIES Research Paper series 69-2021, Centre for International Environmental Studies, The Graduate Institute.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nat:natene:v:6:y:2021:i:12:d:10.1038_s41560-021-00934-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.nature.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.