Friday, February 19, 2021

Economic theory and climate policy

A recent issue of Nature Climate Change carried an article by Jonas Meckling & Bentley B. Allan, "The evolution of ideas in global climate policy". The abstract:

From carbon pricing to green industrial policy, economic ideas have shaped climate policy. Drawing on a new dataset of policy reports, we show how economic ideas influenced climate policy advice by major international organizations, including the Organisation for Economic Cooperation and Development and the World Bank, from 1990 to 2017. In the 1990s, the neoclassical notion of weak complementarity between environmental protection and growth dominated debates on sustainable development. In the mid-2000s, economic thought on the environment diversified, as the idea of strong complementarity between environmental protection and growth emerged in the green growth discourse. Adaptations of Schumpeterian and Keynesian economics identified investment in energy innovation and infrastructure as drivers of growth. We thus identify a major transformation from a neoclassical paradigm to a diversified policy discourse, suggesting that climate policy has entered a postparadigmatic period. The diversification of ideas broadened policy advice from market-based policy to green industrial policy, including deployment subsidies and regulation.

The number of times neoclassical, Keynesian/Schumpeterian or limits-to-growth arguments appeared in our sample of IO annual reports each year from 1990 to 2017 (from the article)

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