Clean Energy Deployment

Here we review several broad policy tools for accelerating clean energy deployment, improving efficiency, and phasing out pollution and emissions. Research and development as a clean energy deployment mechanism is discussed in more detail elsewhere.

Electricity Deployment

We estimate the following average values of building new power plants. We recommend the construction of solar PV plants, followed by onshore wind power, where feasible. Details are in our assessments of individual energy production technologies.

The costs and benefits of building new power plants at average costs. We assume 1 GW of new capacity is built, displacing what would otherwise be natural gas. Benefits differ across technologies because capacity factors--the ratio between actual production and theoretical production at the maximum rate 24/7--differ. Both the financial cost and external costs of natural gas and the various sources are considered. We also attribute to the plant the value of cost reductions via learning-by-doing; see the section on learning by doing and on specific technologies for more details.

The benefits of new plants include possibly cheaper electricity, reduction of greenhouse gases and other pollution, and the cost reduction of similar future technology through learning-by-doing. No learning-by-doing effect for nuclear power was identified in the literature; hence the cost/benefit ratio of that technology is rather poor.

We emphasize that the values above are averages, and particular values for a given project vary considerably.

Energy Investment

The world invested nearly two trillion dollars in energy projects in 2018 as follows.

World public and private energy investments in 2018. Source: IEA ¹.

Investment trends point to ongoing advancement of renewable energy in the power sector, but little progress in transportation or industry. The International Energy Agency ¹ projects that world investment in low-carbon energy must nearly double by the late 2020s to meet their Sustainable Development Scenario, which is compatible with two degrees Celsius of global warming.

Cost of Decarbonization Policies

Economists generally believe that a broad carbon price should be a central component of reducing emissions ². Following are some estimated costs of reducing emissions by several other policy tools, which may function as alternatives or supplements to carbon pricing.

Cost comparison of four policies implemented at either the federal level or across many states in the United States. Note that fiscal cost to the government, or tax revenue raised by the government, is not equivalent to a cost to society as a whole. The former are lower, as the collected or spent money is still part of the economy, but a general direct comparison between different kinds of costs is difficult. Sources: analysis of Production Tax Credit and fuel excise taxes by the National Research Council ² and analysis of renewable portfolio standards by Greenstone and Nath ³.

Commercialization of Technology

Several lines of evidence suggest that it takes about 20 years--sometimes much less and sometimes much more--for an idea to progress from scientific research to commercial technology ⁴, ⁵, ⁶, ⁷.

Companies commercializing new technologies often face a "valley of death", whereby they have demonstrated technically a potentially viable technology but are unable successfully commercialize the product ⁸. This is often caused by the fact that more money is available for companies conducting research and development and for companies with commercial products than for companies that are working to bring products to market ⁹. This challenge is exacerbated by the fact that incumbent technologies face a sunk cost advantage with their capital deployment ¹⁰.

International Agreements

International agreements, such as the United Nations Framework Convention on Climate Change, the Kyoto Protocol, and the Paris Agreement, can help reduce emissions, but only if followed by additional policy tools. Evidence from the Kyoto Protocol is weak but suggests that it has resulted in modest emissions reductions.

Estimates of emissions reductions by countries that have adopted targets under the Kyoto Protocol, relative to what emissions would have been without targets. Sources: Aichele and Felbermayr ¹¹, Grunewald and Martínez-Zarzoso ¹², Iwata and Okada ¹³.

These values may be offset by the self-selection problem--that countries may have adopted targets that they would have achieved anyway ¹²--or the phenomenon of "exporting emissions", or importing emissions-intensive products from countries without climate change targets ¹¹.

Nascimento, Kuramochi, and Höhne ¹⁴ find that among G20 countries, projected greenhouse gas emissions for 2030, as of 2021, were 15% lower than projected emissions for 2030 as of 2015, when the Paris Agreement was ratified. An estimated quarter of this reduction can be explained by the economic disruption of the COVID-19 pandemic, and of the remaining reduction, it is unclear how much is due to policies that were enacted as a result of Paris commitments, and how much is due to other factors.