The Role of Sustainable Investment in Climate Policy

Franziska Schütze, Steffen Fürst, Jahel Mielke, Gesine A. Steudle, Sarah Wolf and Carlo C. Jaeger
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Franziska Schütze: Global Climate Forum, 10178 Berlin, Germany
Steffen Fürst: Global Climate Forum, 10178 Berlin, Germany
Jahel Mielke: Global Climate Forum, 10178 Berlin, Germany
Gesine A. Steudle: Global Climate Forum, 10178 Berlin, Germany
Sarah Wolf: Global Climate Forum, 10178 Berlin, Germany
Carlo C. Jaeger: Global Climate Forum, 10178 Berlin, Germany

Sustainability, 2017, vol. 9, issue 12, 1-19

Abstract: Reaching the Sustainable Development Goals requires a fundamental socio-economic transformation accompanied by substantial investment in low-carbon infrastructure. Such a sustainability transition represents a non-marginal change, driven by behavioral factors and systemic interactions. However, typical economic models used to assess a sustainability transition focus on marginal changes around a local optimum, which—by construction—lead to negative effects. Thus, these models do not allow evaluating a sustainability transition that might have substantial positive effects. This paper examines which mechanisms need to be included in a standard computable general equilibrium model to overcome these limitations and to give a more comprehensive view of the effects of climate change mitigation. Simulation results show that, given an ambitious greenhouse gas emission constraint and a price of carbon, positive economic effects are possible if (1) technical progress results (partly) endogenously from the model and (2) a policy intervention triggering an increase of investment is introduced. Additionally, if (3) the investment behavior of firms is influenced by their sales expectations, the effects are amplified. The results provide suggestions for policy-makers, because the outcome indicates that investment-oriented climate policies can lead to more desirable outcomes in economic, social and environmental terms.

Keywords: climate policy; green growth; macroeconomic models; sustainable investment; technical progress; expectations; 1.5 °C (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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