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 decarbonize their economies, drawing primarily on the UK experience. There are five main conclusions. First, decarbonization 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 behavioral 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 decarbonizing many parts of the economy, including transport, heating and parts of industry. Decarbonization 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 behavior 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.

Number of Pages in PDF File: 30

Keywords: climate change policy, decarbonization, green growth, mitigation, UK

JEL Classification: Q28, Q54

working papers series