A practitioner’s guide to a low-carbon economy: lessons from the UK


Abstract

This paper identifies practical lessons for policy makers that seek to decarbonise their economies, drawing primarily on the UK experience. There are five main conclusions. First, decarbonisation needs a solid legal basis to give it credibility and overcome time inconsistency problems. Second, putting a price on carbon is essential, but low-carbon policies also have to address wider market, investment and behavioural failures. This in turn raises issues of policy complexity and coordination. Third, the low-carbon economy is likely to be highly electrified. Clean electricity could be a cost-effective way of decarbonising many parts of the economy, including transport, heating and parts of industry. Decarbonisation therefore starts in the power sector. Fourth, the low-carbon transition is primarily a revolution of production, not consumption. Both supply-side innovation and demand-side adjustments in lifestyle and behaviour are needed, but the former dominate. Fifth, the transition to a low-carbon economy is economically and technologically feasible. Achieving it is a question of policy competence and the political will to drive economic and social change.

Samuel Fankhauser