Rethinking Decarbonisation Incentives (RDI) is exploring how UK policies can promote clean growth by taking a ‘whole systems’ perspective on carbon policy.
Through the project, Energy Systems Catapult aims to promote broader strategic debate about how the UK could improve carbon policy to stimulate innovation and clean growth.
Click below for an overview of the RDI project:
The Challenge and Opportunity
The UK has clear targets to reduce carbon emissions, but the economic incentives to do so are complex and changeable. Current policies comprise a combination of different taxes, subsidies, contracts and regulations, which is a long way removed from the textbook ideal of an economy-wide carbon price.
The reward for cutting carbon emissions is generally much lower than it needs to be, and it varies across different sectors of the economy. This makes it very difficult to promote the right balance of investment or to encourage long-term investment and innovation.
The debate in the UK about energy and climate change policy often focuses on specific parts of the energy system or particular policies, most often in the power sector. Discussion and analysis naturally tend to address the detail of the particular energy policy instruments in play.
The Government published its Clean Growth Strategy, which provides a broader framework, but with a wide range of sector-specific policy intentions.
There is relatively less strategic debate about:
- The broad pattern of economic drivers for decarbonisation,
- How to create an enduring economic framework for carbon reduction across the whole economy.
Other jurisdictions around the world appear to have a more active debate around economy-wide carbon policy (e.g. California, Canada etc.), with widespread engagement in questions of carbon policy, taxation and ‘cap and trade’ design.
The RDI project aims to fill this gap and stimulate more consideration of the economy-wide framework for carbon reduction and clean growth in the UK.
The Catapult is exploring:
- How current policies incentivise action to cut emissions in different sectors?
- What we can learn from international case studies and examples?
- What reform options could work for the UK to improve incentives to cut emissions efficiently and promote clean growth?
The RDI project has so far produced:
- Current Economic Signals for Decarbonisation in the UK – summarised the ‘effective carbon prices’ in different UK sectors;
- 11 International Case Studies – showcasing experience with decarbonisation policies and summarised the key findings;
- Five Policy Reform Options – formulated a selection of possible policy reform options to incentivise emission reductions across the UK economy;
- Sectoral Assessment for Agriculture, Forestry and Other Land Use – explores the issues and challenges associated with policy mechanisms to deliver climate mitigation in the agriculture, forestry and other land use (AFOLU) sectors;
- Carbon Policy and Economy-Wide Productivity – explores the links between carbon policy and economy-wide productivity.
Who is involved?
We are working with a number of collaborators and advisors, which include:
- William Blyth Oxford Energy Associates
- Mark Johnson Ricardo Energy & Environment
- Chris Thorne Energy Technologies Institute (ETI)
- David Joffe Committee on Climate Change (CCC)
- Sam Fankhauser Grantham Research Institute, LSE
- Martin Nesbit Institute for European Environmental Policy (IEEP)
The next steps of the project intend to:
- Discuss the consequences that the proposed reform options might have on key sectors in the UK, including Road Transport, Residential Heat, Agriculture, and Industry;
- Determine the impact that alternative pathways have in the context of productivity and Clean Growth/Industrial Strategy;
- Assess the available near-term options to address low priced emissions;
- Continue to promote debate and engage with stakeholders.