Dr Elena Verdolini explains decarbonising the energy sector

CMCC and EIEE senior researcher Elena Verdolini explains how the energy sector, the largest producer of greenhouse gases, is surprisingly one of the easiest areas to decarbonise.

Electrification is growing fast as it becomes increasingly low-carbon or carbon-free entirely. Dr Verdolini explains how variability is a major obstacle to increasing the use of renewables and goes on to talk about the best ways to tackle the increasingly difficult obstacles this sector faces.

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Threshold policy effects and directed technical change in energy innovation

This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country’s relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries.

Written by Lionel Nesta, Elena Verdolini and Francesco Vona

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