The behavioural aspect of green technology investments: A general positive model in the context of heterogeneous agents

This is the final version. Available on open access from Elsevier via the DOI in this recordStudies report that firms do not invest in cost-effective green technologies. While economic barriers can explain parts of the gap, behavioural aspects cause further under-valuation. This could be partly due to systematic deviations of decision-making agents’ perceptions from normative benchmarks, and partly due to their diversity. This paper combines available behavioural knowledge into a simple model of technology adoption. Firms are modelled as heterogeneous agents with different behavioural responses. To quantify the gap, the model simulates their investment decisions from different theoretical perspectives. While relevant parameters are uncertain at the micro-level, using distributed agent perspectives provides a realistic representation of the macro adoption rate. The model is calibrated using audit data for proposed investments in energy efficient electric motors. The inclusion of behavioural factors reduces significantly expected adoption rates: from 81% using a normative optimisation perspective, down to 20% using a behavioural perspective. The effectiveness of various policies is tested.German National Academic FoundationEngineering and Physical Sciences Research Council (EPSRC

The effectiveness of policy on consumer choices for private road passenger transport emissions reductions in six major economies

This is the final version of the article. It first appeared from IOP via http://dx.doi.org/10.1088/1748-9326/10/6/064008The effectiveness of fiscal policy to in uence vehicle purchases for emissions reductions in private passenger road transport depends on its ability to incentivise consumers to make choices oriented towards lower emissions vehicles. However, car purchase choices are known to be strongly socially determined, and this sector is highly diverse due to significant socio-economic differences between consumer groups. Here, we present a comprehensive dataset and analysis of the structure of the 2012 private passenger vehicle eet-years in six major economies across the World (UK, USA, China, India, Japan and Brazil) in terms of price, engine size and emissions distributions. We argue that choices and aggregate elasticities of substitution can be predicted using this data, enabling to evaluate the effectiveness of potential fiscal and technological change policies on eet-year emissions reductions. We provide tools to do so based on the distributive structure of prices and emissions in segments of a diverse market, both for conventional as well as unconventional engine technologies. We find that markets differ significantly between nations, and that correlations between engine sizes, emissions and prices exist strongly in some markets and not strongly in others. We furthermore find that markets for unconventional engine technologies have patchy coverages of varying levels. These findings are interpreted in terms of policy strategy.We acknowledge our respective funders, the Three Guineas Trust (A. Lam) and the UK Engi- neering and Physical Sciences Research Council (EPSRC), fellowship no EP/K007254/1 (J.-F. Mercure)

Toward Risk-Opportunity Assessment in Climate-Friendly Finance

This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this recordFossil-fuel divestment might not offer the climate-change solution many are hoping for because it merely re-brands financial assets with higher risks but does not make them disappear. Making climate-policy decisions on the basis of assessing financial risks and business opportunities could improve our ability to govern a smooth sustainability transition.Natural Environment Research Council (NERC)Economic and Social Research Council (ESRC

Assessing the effectiveness of South Africa’s emissions based purchase tax for private passenger vehicles: a consumer choice modelling approach.

South Africa is an important economy in terms of global greenhouse gas emissions and it has made progressive policy steps to address its national emissions. One significant national fiscal policy is the emissions based purchase tax for private passenger vehicles, implemented in September 2010. There has, however, been little attempt to assess the effect that this key mitigation policy has had on the emissions of new passenger vehicle fleets. This study uses a discrete consumer choice model to assess the effectiveness of this tax policy in changing consumer behaviour and reducing fleet emissions. It finds that the emissions reduction achieved by the tax were negligible compared to the increases in fleet emissions associated with the growing vehicle market. It is demonstrated that the structure of the tax policy does not suit the dynamics of the South African vehicle market and the policy would require restructuring if it is to more effectively reduce fleet emissions. In addition, for the tax policy to effect significant fleet emissions reductions in the future it will require the emergence of low- and zero-carbon vehicle technologies in the lowest price brackets of the market, possibly via subsidy policies

Which policy mixes are best for decarbonising passenger cars? Simulating interactions among taxes, subsidies and regulations for the United Kingdom, the United States, Japan, China, and India

This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this record Reducing transport emissions, in particular CO2 emissions from passenger vehicles, is a key element in mitigating the risk of climate change. Conventional welfare economics recommends the use of comprehensive pricing of carbon emissions, which may not necessarily be the most effective approach in transport systems. This paper uses an evolutionary technology diffusion model to simulate the impact of climate policies on passenger car emissions in the US, UK, Japan, China and India up to 2050, seeking to understand policy interaction. We analyse six commonly seen policy instruments and explore systematically the impact of combining each of these policies by developing 63 scenarios for the US, UK, China, Japan, and India. We assess both the policies’ effectiveness in achieving emissions reductions and their cost-effectiveness in doing so. We show how the diffusion dynamics of the system can lead to interaction of policy levers, generating synergies in some cases (combined effectiveness more than the sum of its parts), and mutual impediment effects in others (combined effectiveness less than the sum of its parts). The paper identifies particular combinations of regulatory, procurement and fiscal policies that are particularly effective at generating rapid change without needing the use of very high fuel taxes or carbon pricing. Notably, combining electric vehicle mandates with taxes and regulations on combustion vehicles is highly effective, as it simultaneously improves the availability of low-carbon options while penalising high carbon options. Simple principles for policymaking can be inferred

Evidence for a global electric vehicle tipping point

This is the final version. Available from the Global Systems Institute, University of Exeter via the link in this recordGSI scientific working paper series number 2022/01Electric vehicles (EVs) can reduce road transport emissions and have recently seen rapid innovation, decline in cost and a rise in popularity. Achieving a transition to EVs hinges upon their accessibility to current users of internal combustion engine vehicles (ICEV). Here we show with historical evidence that globally, an irreversible private passenger EV diffusion tipping point may have been crossed, where sales of ICEVs decline in leading markets, as preferences fo r and access to EVs rise, in a selfreinforcing manner. We analyse the structure and dynamics between 2016 and 2021 of four leading car markets comprehensively. The pandemic has drastically affected ICEV sales: many models are now planned to be discontinue d, while EVs see unaffected rapid growth and achieve cost parity within a few years. We suggest that coordinated policy incorporating EV mandates in the leading car markets could induce an EV transition in the rest of the world

Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use

This is the author accepted manuscript. The final version is available from Taylor & Francis (Routledge) via the DOI in this record.Energy and climate policies may have significant economy-wide impacts, which are regularly assessed based on quantitative energy-environment-economy models. These tend to vary in their conclusions on the scale and direction of the likely macroeconomic impacts of a low-carbon transition. This paper traces the characteristic discrepancies in models’ outcomes to their origins in different macro-economic theories, most importantly their treatment of technological innovation and finance. We comprehensively analyse the relevant branches of macro-innovation theory and group them into two classes: ‘Equilibrium’ and ‘Non-equilibrium’. While both approaches are rigorous and self-consistent, they frequently yield opposite conclusions for the economic impacts of low-carbon policies. We show that model outcomes are mainly determined by their representations of monetary and finance dimensions, and their interactions with investment, innovation and technological change. Improving these in all modelling approaches is crucial for strengthening the evidence base for policy making and gaining a more consistent picture of the macroeconomic impacts of achieving emissions reductions objectives. The paper contributes towards the ongoing effort of enhancing the transparency and understanding of sophisticated model mechanisms applied to energy and climate policy analysis. It helps tackle the overall “black box” critique, much-cited in policy circles and elsewhere

Macroeconomic impact of stranded fossil-fuel assets

Several major economies rely heavily on fossil-fuel production and exports, yet current low-carbon technology diffusion, energy efficiency and climate policy may be substantially reducing global demand for fossil fuels.1-4 This trend is inconsistent with observed investment in new fossil-fuel ventures1,2, which could become stranded as a result. Here we use an integrated global economy environment simulation model to study the macroeconomic impact of stranded fossil-fuel assets (SFFA). Our analysis suggests that part of the SFFA would occur as a result of an already ongoing technological trajectory, irrespective of whether new climate policies are adopted or not; the loss would be amplified if new climate policies to reach the 2°C target are adopted and/or if low-cost producers (some OPEC countries) maintain their level of production (‘sell-out’) despite declining demand; the magnitude of the loss from SFFA may amount to a discounted global wealth loss of $1-4tn; and there are clear distributional impacts, with winners (e.g. net importers such as China or the EU) and losers (e.g. Russia, the US or Canada, which could see their fossil-fuel industries nearly shut down), although the two effects would largely offset each other at the level of aggregate global GDP.The authors acknowledge C-EERNG and Cambridge Econometrics for support, and funding from EPSRC (JFM, fellowship no. EP/ K007254/1); the Newton Fund (JFM, PS, JV, EPSRC grant no EP/N002504/1 and ESRC grant no ES/N013174/1), NERC (NRE, PH, HP, grant no NE/P015093/1), CONICYT (PS), the Philomathia Foundation (JV), the Cambridge Humanities Research Grants Scheme (JV), and Horizon 2020 (HP, JFM; Sim4Nexus project)