A variety of market-based policies have been adopted around the globe to reduce greenhouse gas emissions for the power sector and promote clean fuel technologies. To what extent is there a case for preferring one policy instrument over another, and are combinations of policies more efficient than one policy alone?
In a new Weekly Policy Commentary, RFF Senior Fellow Carolyn Fischer says while there is a clear policy winner when it comes to efficiently cutting emissions—a price on carbon—the best course of action to stimulate clean technology while reducing power-sector emissions may involve using a little bit of everything:
The optimal policy combines an emissions price with policies to capture spillovers in the market for knowledge—namely, a proportional R&D subsidy and a small subsidy for renewable production associated with learning-by-doing. These corrective policies provide positive benefits and allow the emissions price to fall by one-third to meet the same target. Together, they can achieve emissions reductions at significantly lower cost than any single policy alone.
Read Fischer’s Reducing Emissions While Promoting Green Power: A Look at the Options here.
