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The Supply Side of Decarbonization

The prevailing approach to promoting the clean-energy transition focuses exclusively on boosting global demand for decarbonization. But a more balanced approach that gives equal weight to supply-side factors would help accelerate the transition, lower costs, reduce inequality, and win more political support.

CAMBRIDGE – You have heard this before: greenhouse gas emissions (GHG) are too high to stop catastrophic changes to our climate. Countries, companies, and families must be made aware of the fragility of the planet we live in.

And that is happening: Analysts are busy estimating the cost of the energy transition, and ESG-minded investors are organizing financial vehicles to fund green projects. A growing number of economists want to tax carbon to encourage substitution away from it. Others focus on ensuring that the costs of the clean-energy shift do not fall disproportionately on developing countries, which are now expected to forgo cheap (albeit dirty) energy sources despite accounting for far lower GHG emissions – both historically and currently – than their developed counterparts. The United Nations Framework Convention on Climate Change (UNFCCC) asks countries to announce their Nationally Determined Contributions (NDCs) and hopes that social pressure will force them to deliver on those promises.

All of these strategies for promoting the clean-energy transition – moral persuasion, price signals, and additional funding – have one thing in common: they focus on bolstering global demand for decarbonization.