IEA Paper Highlights Interactions of Policies for Renewable Energy and Climate

18 March 2011: The International Energy Agency (IEA) has released a working paper by Cédric Philibert titled “Interactions of Policies for Renewable Energy and Climate.”

The paper illustrates that, even where carbon dioxide emissions are capped or priced, financial support for renewable energy technologies is justified due to the immaturity of renewable technologies and and inexperience with them in the marketplace. The paper shows that such early investments reduce costs over time to make mature renewable energy more affordable on larger scales. It argues that policies then need to be broadened to account for spillovers.

After technology improvement is factored in, Philibert argues that the optimal policy portfolio for reducing support policy costs over the long term entails policies to address: the carbon dioxide externality directly; spillover effects from research and development (R&D) efforts; and spill‐over effects from learning‐by‐doing. The paper closes by highlighting the importance of understanding and addressing interactions among policy instruments. [Publication: Interactions of Policies for Renewable Energy and Climate]