More investment in research and development (R&D) is needed from governments to accelerate the transition to a low carbon energy system.
That’s according to a report by the Massachusetts Institute of Technology (MIT) which reveals how supporting R&D and not just a carbon tax, might be the best way to help clean energy technologies compete with fossil fuels.
According to the report, an ideal policy would feature a high initial level of R&D subsidies, which would drop to nearly zero after 50 years.
The high R&D subsidy allows for a quicker transition to clean energy while not slowing down economic growth, as a carbon tax alone would, it added.
MIT economist Daron Acemoglu said: “Most people know we are frying the planet, what is probably less clear is how to resolve that.
“We propose that you use the carbon tax in moderation and use research subsidies for clean technology in order to make that transition faster. The optimal policy is front-loaded intervention right away. Clean technologies allow you to bypass the growth retarding implications of a carbon tax,”