Accelerating the the commercialization and adoption of clean innovations requires three key policy elements, according to Stewart Elgie, chair of Sustainable Prosperity and a law professor at the University of Ottawa. Policies need to be stringent and flexible, but most importantly, they need to be predictable, he says.
During a presentation at the Canadian Climate Forum’s 2016 Symposium, Elgie noted that clean innovation differs from others because there hasn’t traditionally been a price on pollution to drive adoption. So that means government has to create that market demand, and one way to do that is to put a price on carbon. But that type of policy needs to be complemented by longer-term and stable policies, he added.
“The end goal is to get firms to invest in low-carbon technologies, processes and buildings that are going to be around for 10 to 20 years or more. So, their choice about making that investment depends on what they think the economy is going to look like in 10 or 20 years,” Elgie said.
That means governments have to create predictability if they want investments in clean innovation to take place. For example, the United States used to have year to year incentives for clean power, the result being less than expected investment. But once that policy was set to seven years, investment exploded.
“This is true not just for incentives, it’s true for carbon pricing, its true for building codes, it’s true for motor vehicle standards, all kinds of policies. Governments have to set them far enough out that it sends a signal to investors that we’re going to have policy stability,” argued Elgie.
He acknowledged in his presentation that there is the possibility that subsequent governments could change course and reverse policies, therefore putting a wrench into predictability. But Elgie said there are actions governments of the day can take to limit the impact of such positions.
Carbon price trajectories such as the five-year term the Liberals have set for their price floor is one example. Another is a default trajectory for the following 10 to 15 years. An expert body tasked to advise on how that trajectory is developed is yet another option. Elgie said that this latter approach is done with monetary policy, so why not for clean innovations.
This was one of the great successes of the United Kingdom, he said, noting that there was “ongoing institutional momentum” and that it created an expert third-party body to continue to advise on the climate. Approaches such as this can help politicians with their “attention deficit disorder” because they lock in the momentum, or stickiness in political science jargon.
“Those kinds of long-term institutions and those kinds of long-term structural changes are going to be needed to power us through what’s going to be a 10 to 20 year change,” argued Elgie.
Canadian Green Tech is attending the Canadian Climate Forum’s 2016 Symposium and will have more next week.