Economics of Energy Innovation and System Transition: Synthesis Report

The economics of climate change has traditionally been framed in terms of the costs of cutting emissions, relative to a fossil-fuel dominated system, assumed to be cheaper. The reality is different. Decarbonisation involves a competition between two paths of investment: high and low-carbon ways of generating, and using, energy. The challenge is best understood not as an additional cost to existing systems, but as choice in which lower carbon investment pathways involve profound, systemic transitions across many sectors. As such, it involves risks and opportunities of macroeconomic significance.

As the nature of this challenge has become clearer, so have the limitations of traditional economic tools. The Economics of Energy Innovation and System Transition (EEIST) project has worked to develop and apply analytical concepts and methods that can be useful to policymakers in this context of innovation and structural change. This Synthesis reports some of the key findings from the project.