Economic Incentives Trounce Rational Arguments in

Economic Incentives Trounce Rational Arguments in Driving Clean-Energy Transition

Proponents of renewable energy are increasingly relying on economic incentives rather than rational arguments to drive the global transition to green energy. As climate policies in developed nations with the most sway in the global transition to green energy increasingly come under attack, economic incentives may offer a means of driving the energy transition without becoming a target for populist rhetoric.

Rather than making rational arguments about the benefits of convincing regular citizens to adopt renewable-energy technology and support the transition away from fossil fuels to cleaner alternatives, economic incentives could be more effective at getting the job done. According to a new working paper by Professor Robert Z. Lawrence at Harvard Kennedy School and Edoardo Campanella, a Mossavar-Rahmani Center for Business and Government fellow, economic incentives could be instrumental in dealing with the expanding populist opposition to green energy in developed nations.

The working paper covers trends in the burgeoning green-energy space and explores potential solutions to the growing opposition the industry is facing. The duo argues that climate policies are an easy target for populist opposition because they often need expert knowledge and a call for action on a global scale. Furthermore, the researchers note that the factors that propelled the right-wing populist candidates in the past are gaining momentum and could pose a major challenge to energy transition efforts.

These factors include financial hurdles caused by soaring public-debt levels as well as mounting opposition to immigration. The study authors posit that rising living costs, particularly for working and middle-class families, coupled with the passion associated with populist rhetoric, means rational arguments, much less calls for self-sacrifice, are unlikely to change consumer behavior.

However, economic policies that make green technologies more affordable than fossil fuels would be much more effective at changing consumer behavior. Regular consumers who are grappling with high costs of living are much more likely to adopt green technologies such as electric cars if they are cheaper and make their lives easier.

The authors said costs involved in the transition to renewables should be lowered by leveraging open trade in the short-term and investing in innovation in the long-term. As the green-technology segment is virtually in its infancy, long-term innovation will be instrumental in developing more efficient and, most importantly, more affordable technology. Countries will also need to tailor their economic strategies to ensure their deployment is tied to bottom-up policies, engaging political strategies and emotional narratives, the study authors say.

Many companies, such as Energy and Water Development Corp. (OTCQB: EAWD), are currently developing energy and water solutions that can verifiably make an economic case for their deployment. This is one of the ways through which public and private sector actors can complement each other in a bid to drive consumer behavior change with regard to the sustainable use of resources.

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