Actions to stimulate low-carbon innovation – a global policy priority – are moving full speed ahead. This chapter provides evidence to inform these and other initiatives seeking to stimulate low-carbon innovation. A crucial challenge for climate change policies is ensuring that low-carbon innovation activity is either additional to current R & D expenditures, or at least will displace innovation in polluting technologies rather than other socially valuable innovation. Price-based instruments, such as carbon markets, and quantity-based instruments, such as renewable energy mandates, tend to favour innovation in technologies that are closest to the market. Thus, they need to be complemented by direct support to emerging technologies that will be essential to long-term emissions reduction targets through public funding of R & D and feed-in tariffs. Finally, increasing public support for low-carbon R & D may be politically attractive because low-carbon innovations have greater economic benefits than the carbon-intensive technologies they replace.
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