Sustainable transformation to sustainability

Good climate policy has to be effective and efficient. This project investigates several aspects of climate policy, including obstacles and challenges for design and implementation. One such obstacle is the behavioral response to policies. People might react to new policies in unexpected and sometimes undesirable ways. Several countries now promote purchase and use of green cars through financial as well as non-financial incentives. The aim is to reduce the number of brown cars on the road. Kverndokk et al. (2020) study how such incentives affect non-targeted consumers. The results suggest unintended consequences and identify mechanisms through which fossil car driving increases as a consequence of green-car incentives. Another obstacle is related to a rising resistance to international trade, including trade in emission allowances. Hauge et al. (2021) investigate how moral considerations, background conditions and risk can trigger resistance to implement trading institutions. Combining survey results and experimental evidence, the authors conclude that distributional concerns is an important driver for opposition to trade. Karp and Traeger (2018) investigate the effect of uncertainty about the technological development on the choice between permit markets and taxation to reduce emissions. In ranking these two policies, the paper ?Prices versus quantities? by Martin Weitzman from 1974 has been hugely influential. Karp and Traeger conclude that the time horizon of the consequences of emissions requires fundamental change in the ranking criterion of cap-and trade systems and taxes proposed by Weitzman. Hoel (2020) further investigate climate policy instruments by considering the optimal path for use of bioenergy in the transition towards a low-carbon economy. Hoel finds that it may be optimal to first have an increase in use of bioenergy, and later a reduction. The optimal use of policy instruments over time will reflect this development. In three different papers, Bård Harstad investigates how the fight for reelection may affect politicians? choices in climate policies. Harstad (2020,1) shows how politicians may want to increase their investments in green technology to motivate future politicians to act sustainably. Battaglini and Harstad (2020) investigate how the uncertainty of reelection can incentivize both green and brown parties to negotiate weaker international climate treaties. Finally, Harstad (2020,2) shows how the possibility of future exploitation of an exhaustible resource ? such as rain forest ? will strengthen the current government?s incentive to exploit it. Many environmental problems are public-good problems. Existing research have found that cooperation on public-goods provision often disappears over time unless the most cooperative individuals can interact only with each other. Hauge et al. (2018) present three economic lab-experiments where individuals choose whether to join a group that has committed to contribute to a charity. They demonstrate that those who choose this pre-committed group will sustain cooperation over time. Reduced extraction of oil and gas in Norway will lower global energy prices and therefore result in some extent of carbon leakage. Based on a literature review, Holtsmark (2019) concludes that cost-efficient Norwegian climate policy includes reduction in oil extraction. Furthermore, Ashiem et al (2019) show how a supply-side climate treaty, complementing a demand-side treaty such as the Paris agreement, could benefit the climate. The technological development will be crucial for the costs of reducing GHG emissions in the coming years. Greaker et al. (2019) investigate how national climate policy may affect the policies chosen in the rest of the world and conclude that technology is an important channel. Ultimately, transition to a low-emission society requires radical changes in the electricity generation sector. The aim of Gaure and Golombek (2020,1,2) is to investigate the possibilities for the EU to design a completely CO2 emission-free electricity generation sector based on wind power and solar. The articles demonstrate that this is possible and illustrate how the need for back-up technologies and battery capacity depends on the European trade patterns. Furthermore, both Aune et al. (2020) and Golombek et al. (2020) study the development and diffusion of carbon capture and storage (CCS) technologies. The findings suggest that financial support directed at the development of CCS technology is more effective than support directed towards the user of the technology. Finally, we consider the technological development as an important determinant of the development in the European permit market (EU ETS). Holtsmark and Midttømme (2021) show that linking of different countries in a common emission permit market, such as the EU ETS, can contribute to global emission reductions through technology development.

Prosjektet har bidratt til utarbeidelsen av forskningsartikler av høy kvalitet, som er publisert i høyt rangerte tidsskrifter på flere ulike områder. Fellesnevneren for innholdet i artiklene er at de bidrar til kunnskapsutvikling som er nødvendig på veien mot et bærekraftig lavutslippssamfunn. Flere av artiklene som er utarbeidet i prosjektet beveger seg også ut i randsonen av det som ofte oppfattes som tradisjonell samfunnsøkonomi. Slikt arbeid er med på å utfordre og utvikle økonomifaget i tillegg til å bidra til kunnskapsgrunnlaget og forskningsfronten på de aktuelle fagområdene. Prosjektet har også effekter utover prosjektets deltakere og deres forskning. Først og fremst har prosjektet bidratt til både kunnskap og offentlig diskusjon om klimapolitiske virkemidler både i Norge og internasjonalt.

Effective policies are required if Norway is to reach its ambitious goal of becoming a low-emission society by 2050: Resources have to be directed at green R&D to spur innovations in environmentally-friendly technologies, thereby making it possible for firms and consumers to shift to low-emissions activities. In particular, Norway's substantial extraction of petroleum may have to be reconsidered. This proposal examines some of the key factors necessary to transform Norway to a low-emission society: - Policy choice: Which of the available climate policy options will be chosen and implemented in a democratic society? (Work package 1, task 1.1) - Policy response: Green policies may fail to work as expected if actors respond differently to the policy than anticipated. How may social, psychological and other motivations influence the effects of common policy instruments in the climate field? (Work package 1, task 1.2) - Green technology policy: Most investments in green R&D take place abroad. This suggests that Norway should have a two-sided strategy: push for international agreements that spur green R&D, and also implement domestic instruments to trigger more, and efficient, green R&D. How can an international green R&D agreement be designed, and how should Norway design its green R&D policy? (Work package 2) - The interaction of policies for petroleum extraction and emission abatement: Extraction of Norwegian oil and gas tend to increase emissions of CO2, thereby undermining the goal of a reaching a low-emission society. However, extraction of natural gas may reduce the use of coal and thus contribute to lower global emissions in the short run. On the other hand, extraction of oil and natural gas reduce energy prices, which reduces incentives for investments in green R&D. How should Norway, with its stated goal of becoming a low-emissions society, balance these concerns? (Work package 3).