Working Paper: CEPR ID: DP17677
Authors: Frederick van der Ploeg; Anthony Venables
Abstract: In the presence of strategic complementarities stemming from peer effects in demand or from technological spill-overs, propagation and amplification mechanisms increase the effectiveness of climate policies. This suggests that climate goals can be met with smaller policy interventions. However, if there are multiple equilibria, radical and more ambitious climate policies are needed to shift the economy from a high-emissions to a low-emissions path.. Once the radical shift has taken place the transformative policies can be withdrawn. More generally, such policies can set in motion social, technological, and political tipping points. The rationale for such policies is strengthened due to key households, corporations and institutions being at the centre of networks, and thus radical climate policies should identify those agents and leverage them. Our proposals offer a complementary perspective to scholars that have emphasised insights from the literature on early warning signals to advocate sensitive intervention points to get more effective and more transformative climate policies.
Keywords: climate policy; peer effects; learning by doing; strategic complementarities; multiple equilibria; tipping points; networks
JEL Codes: Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| radical climate policies (P18) | low-emissions equilibrium (D50) |
| strategic complementarities (D10) | effectiveness of climate policies (F68) |
| peer effects and technological spillovers (O36) | effectiveness of climate policies (F68) |
| radical climate policies (P18) | long-term climate goals (Q54) |
| radical climate policies (P18) | transformative policies withdrawal (O24) |
| radical climate policies (P18) | social, technological, and political tipping points (O35) |
| high-emissions equilibrium (D50) | low-emissions path (Q58) |