New LSE Report : Cost of Delaying Clean Energy Innovation

The longer governments wait to promote clean energy innovation, the greater the eventual cost to the environment and the economy, according to a new report published this week  by the Grantham Research Institute on Climate Change and the Environment and ESRC Centre for Climate Change Economics and Policy at London School of Economics and Political Science.

Shifting our fossil-fuelled civilisation to clean modes of production and consumption requires deep transformations in our energy and economic systems. Innovation in physical technologies and social behaviours is key to this transformation. But innovation has not been at the heart of economic models of climate change. This paper reviews the state of the art on the economics of innovation, applies recent insights to climate change. The core insight is that technological innovation is a path-dependent process in which history and expectations matter greatly in determining eventual outcomes.

The authors of the report – Professor Philippe Aghion (Harvard University), Professor Cameron Hepburn (University of Oxford), Dr Alexander Teytelboym (University of Oxford) and Dimitri Zenghelis (LSE) – find that governments must urgently, but only temporarily, support clean technology innovation.

The report states: “Governments must act now: even for very high discount rates, delaying policies that would redirect innovation towards clean energy sectors and activities will result in much higher costs in future”.

The report on ‘Path dependence, innovation and the economics of climate change’ is a contributing paper to the New Climate Economy project by the Global Commission on the Economy and Climate.

Download the  LSE-GRI_policy_paper_Nov20141




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