THE POLITICAL ECONOMY OF CLEAN ENERGY TRANSITIONS UNU World Institute for Development Economics Research (UNU-WIDER) was established bytheUnitedNationsUniversityasitsfirstresearchandtraining centre and started work in Helsinki, Finland, in 1985. The mandate of the institute is to undertakeappliedresearchandpolicyanalysisonstructuralchangesaffectingdevel- oping and transitional economies, to provide a forum for the advocacy of policies leadingtorobust,equitable,andenvironmentallysustainablegrowth,andtopromote capacitystrengtheningandtraininginthefieldofeconomicandsocialpolicy-making. Its work is carried out by staff researchers and visiting scholars in Helsinki and via networksofcollaboratingscholarsandinstitutionsaroundtheworld. UnitedNationsUniversityWorldInstituteforDevelopment EconomicsResearch(UNU-WIDER) Katajanokanlaituri6B,00160Helsinki,Finland www.wider.unu.edu The Political Economy of Clean Energy Transitions Edited by DOUGLAS ARENT, CHANNING ARNDT, MACKAY MILLER, FINN TARP, AND OWEN ZINAMAN AstudypreparedbytheUnitedNationsUniversityWorldInstitute forDevelopmentEconomicsResearch(UNU-WIDER) 1 3 GreatClarendonStreet,Oxford,OX26DP, UnitedKingdom OxfordUniversityPressisadepartmentoftheUniversityofOxford. ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship, andeducationbypublishingworldwide.Oxfordisaregisteredtrademarkof OxfordUniversityPressintheUKandincertainothercountries ©UnitedNationsUniversityWorldInstituteforDevelopmentEconomicsResearch (UNU-WIDER)2017 Themoralrightsoftheauthorshavebeenasserted FirstEditionpublishedin2017 Impression:1 Somerightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrieval system,ortransmitted,inanyformorbyanymeans,forcommercialpurposeswithout thepriorpermissioninwritingofOxfordUniversityPress. Somerightsreserved.Thisisanopenaccesspublication.Exceptwhereotherwisenoted, thisworkisdistributedunderthetermsofaCreativeCommonsAttribution-Non Commercial-ShareAlike3.0IGOlicence(CCBY-NC-SA3.0IGO),acopyofwhichis availableathttps://creativecommons.org/licenses/by-nc-sa/3.0/igo/. 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PublishedintheUnitedStatesofAmericabyOxfordUniversityPress 198MadisonAvenue,NewYork,NY10016,UnitedStatesofAmerica BritishLibraryCataloguinginPublicationData Dataavailable LibraryofCongressControlNumber:2016953859 ISBN 978–0–19–880224–2 PrintedinGreatBritainby ClaysLtd,StIvesplc LinkstothirdpartywebsitesareprovidedbyOxfordingoodfaithand forinformationonly.Oxforddisclaimsanyresponsibilityforthematerials containedinanythirdpartywebsitereferencedinthiswork. Foreword Sustainableenergytransitionsinvolvetheshiftofresourcesbetweencompet- ingindustrialsectorsandpoliticalconstituencies.Stakeholdersinthisprocess havevaryingdegreesofpoliticalandeconomicpower,andunderstandinghow political economic factors influence clean energy transitions is crucial to effective policy formulation and facilitating transitions to sustainable energy systems. In partnership with the Joint Institute for Strategic Energy Analysis (JISEA),UNU-WIDERgatheredtogetherasubstantialgroupofexpertsfrom aroundtheworld—frombothdevelopedanddevelopingcountries—tolaunch a multidisciplinary research project seeking to contribute to our enhanced understanding of these factors. The project sought to facilitate an energy transitionthatwillgenerateverylargeenvironmentalandeconomicbenefits, particularlyoverthelongrun.Thebeneficiariesofcleanenergytransitionsare highlydiffuseandincludefuturegenerationsnotyetborn. This book is the distilled essence of the cross-cutting academic project. Iexpressmysincereandprofessionalappreciationtothelargegroupofexpert authorsfortheirdedicationtotheproject,andtomyfelloweditorsinhelping bringtogetherthebookforreaderstoenjoyandabsorbalongwiththefindings andpolicyimplications. FinnTarp Helsinki,January2017 Acknowledgements The research project—The Political Economy of Clean Energy Transitions— wascarriedoutinpartnershipbetweentheUnitedNationsUniversityWorld InstituteforDevelopmentEconomicsResearch(UNU-WIDER)andtheJoint Institute for Strategic Energy Analysis (JISEA),1 which is housed within the NationalRenewableEnergyLaboratory(NREL).We,theeditors,aregrateful tothestaffsofthetwoinstitutionswhohavehelpedtomakethiscollaboration smoothandproductive. Wealsothanktheinternationalteamofauthors—eachofwhomareexperts in their own fields—for their dedication to the project, and their patience when reworking and revising the various versions of the individual studies which now make up the polished chapters of the book. This multi-authored book would not have been possible without their expert field knowledge and extremelyvaluableinputs. Adam Swallow, Economics and Finance Commissioning Editor at Oxford University Press, provided invaluable guidance, and we are grateful for the anonymous referee reports that helped sharpen our focus. Particular thanks also go to Lorraine Telfer-Taivainen, UNU-WIDER’s Senior Editorial and Publishing Assistant, for all her careful, critically needed, and sustained publicationsupport,includingthemanycontactswithOUP. UNU-WIDERgratefullyacknowledgesthesupportandfinancialcontribu- tions to its research programme by the governments of Denmark, Finland, Sweden,andtheUnitedKingdom. DouglasArent,ChanningArndt,MackayMiller, FinnTarp,andOwenZinaman 1 TheJointInstituteforStrategicEnergyAnalysisisoperatedbytheAllianceforSustainable Energy,LLC,onbehalfoftheUSDepartmentofEnergy’sNationalRenewableEnergyLabora- tory, the University of Colorado-Boulder, the Colorado School of Mines, the Colorado State University,theMassachusettsInstituteofTechnology,andStanfordUniversity.Theviewsand opinionsofauthorsexpressedhereindonotnecessarilystateorreflectthoseoftheUnitedStates governmentoranyagencythereof. Contents ListofFigures xiii ListofTables xv ListofAbbreviations xvii NotesonContributors xxvii I. THE POLITICAL ECONOMY OF CLEAN ENERGY TRANSITIONS 1. IntroductionandSynthesis 3 DouglasArent,ChanningArndt,MackayMiller,FinnTarp, andOwenZinaman 2. TheHistoryandPoliticsofEnergyTransitions:Comparing ContestedViewsandFindingCommonGround 16 BenjaminK.Sovacool II. CLIMATE POLICY 3. CarbonPricingunderPoliticalConstraints:Insightsfor AcceleratingCleanEnergyTransitions 39 JesseD.JenkinsandValerieJ.Karplus 4. BorderAdjustmentMechanisms:ElementsforEconomic, Legal,andPoliticalAnalysis 60 JulienBueb,LilianRichieriHanania,andAliceLeClézio 5. SupportPoliciesforRenewables:InstrumentChoiceand InstrumentChangefromaPublicChoicePerspective 80 ErikGawel,SebastianStrunz,andPaulLehmann III. INSTITUTIONS AND GOVERNANCE 6. VarietiesofCleanEnergyTransitionsinEurope: Political-EconomicFoundationsofOnshoreand OffshoreWindDevelopment 103 StefanĆetković,AronBuzogány,andMirandaSchreurs 7. ThePoliticalEconomyofEnergyInnovation 123 ShouroDasgupta,EnricadeCian,andElenaVerdolini