Conference Agenda

Energy sector decarbonisation, which is a prerequisite to tackling climate change, entails major low-carbon technology investments across the globe. However, currently only a fraction of those investments is directed towards emerging and developing economies, partly due to large disparities in financing conditions and perceived investment risks. We apply an empirical dataset of costs of capital, differentiated by technology and country, and explore the impacts of various plausible, expert-informed trends of (de-) risking investments in clean energy versus fossil-fuel technologies on decarbonisation pathways. We also assess the effects of a ‘corrective justice’ policy measure of risk underwriting for low-carbon investments, whereby corporate windfall profits are taxed, and the revenues redistributed as subsidies towards higher-risk regions.

Bioenergies from dedicated crops or wood have faced substantial criticisms due to their

significant land requirements. Certain bioenergy pathways, such as biogas generated from crop residues, manure, or food waste, appear to be exempt from this criticism. However, these feedstocks are byproducts of agricultural activities that generate emissions not covered by current climate policies in most countries. We analyze the optimal subsidy to biogas production in a second-best setting where emissions from food production and fossil gas are under-taxed. We show analytically how the indirect effect of the biogas subsidy on food production should be taken into account, as well as the welfare implications. We provide numerical simulations calibrated on the French dairy market and methanization of livestock manure. We compare a second-best situation in which dairy emissions are not taxed with a first-best situation in which they are taxed. This illustration indicates that for a small Social Cost of Carbon, the rebound effect on milk production is moderate, and the optimal subsidy departs from the Pigouvian one accordingly. The second-best quantity of biogas is slightly larger than the first-best one. For a large Social Cost of Carbon, the rebound effect is important, and the gap between the first-best and second-best widens considerably.

As the heating sector typically accounts for a sizable share of carbon emissions in many countries, a better understanding of the determinants of households’ investment decisions on their heating systems is key for supporting the sector’s decarbonisation. To this end, we conducted a survey experiment among about 1,400 German households in 2023, utilising a Multiple Price List framework with repeated choices between two alternatives: a heat pump and a fossil fuel heating system. The results indicate that the provision of information on operating and investment cost may increase the willingness to pay for a heat pump, compared to a fossil system. Providing additional information on the uncertainty associated with cost projections has a similar effect. In contrast, risk aversion, time preferences and financial literacy are not significantly related to the choice. Our findings suggest that the provision of transparent information on cost can foster the transition to renewable heating solutions if these exhibit a cost advantage.

India has made significant strides in expanding its solar market since initiating pilot projects in 1980. This exceptional growth can be attributed to various central and state solar policies. The major push in 2014 came from the central government with the introduction of the Viability Gap Funding (VGF) scheme under the Jawaharlal Nehru National Solar Mission (JNNSM). This initiative included a reverse bidding process on capital subsidy to allocate capacity development among developers. Using a novel auction dataset from 2010-2021, we investigate whether the provision of capital subsidies has contributed to reducing overall solar power tariffs. Our analysis, based on a generalized difference-in-differences (DiD) approach, indicates that the implementation of the VGF scheme resulted in a reduction of the effective feed-in tariff (FiT) inclusive of subsidies. The capital subsidy has resulted in effective FiT by 2.79 standard deviations during the post-treatment period relative to the year preceding the policy implementation. Additionally, we find that subsidy led to the central policy projects experiencing lower effective tariffs compared to state policy projects. However, we find no evidence of differential impact of subsidies based on market concentration levels.