Accelerating the development and diffusion of new energy technologies: Beyond the “valley of death”

There are at least three motivations for government intervention in GHG mitigation: (1) inducing the private sector to reduce GHG emissions directly by setting a price on emissions, (2) increasing the amount of innovative activity in GHG mitigation technology development, and (3) educating the public regarding GHG-reducing investment opportunities, allowing consumers to make better private decisions. This paper discusses the pros and cons of policy instruments that might be used to respond to these motivations and makes recommendations for an appropriate mix of policy instruments over time given both economic and policital/instituional considerations.

Research Highlights► Increases in pre-competitive energy R&D and energy efficiency technology diffusion policies in the US are highly desirable. ► The cost of well designed programs in these areas can be low and the pay off very high. ► Such policies make sense even if the GHG externality is internalized through a GHG tax or equivalent, but are even more desirable if they are not.