on the arena for policy manoeuvring on the supply side Hence at the national

On the arena for policy manoeuvring on the supply

This preview shows page 74 - 76 out of 136 pages.

on the arena for policy manoeuvring on the supply side. Hence, at the national level, the process of low- carbon development needs to be inclusive and enjoy broad social legitimacy to overcome bar-riers. Moreover, social inclusion on a global level is also needed to enable low-carbon development and mitigate its inherent tensions. It is necessary for the strong to include the weak, for example, through new forms of international collaboration. In sum, it seems that low-carbon development is predicated on the creation of inclusive institu- tions at local, national, and global levels. 14 3.2.3 Market formation and demand for knowledge It is a unique characteristic of climate actions that their realisation will benefit mostly future genera- tions. 15 As the market demand of future unborn or infant generations is currently zero, forces outside the marketplace need to intervene. A central goal of policy is thus to construct markets for low-car-bon technologies by creating and managing green rents (Altenburg, 2012). Private investors tend to be hesitant because, un- der current circumstances, most renewable energy technologies are not price-competitive. Distortion of prices arises partly from externalities. In general, the market price mechanism does not automatical- ly internalise the cost of the environmental damage 66 GLOBELICS THEMATIC REVIEW
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caused by the use of fossil energy, nor does it inter- nalise the benefits of the use of renewable energy. Attempts have been made to address this type of market failure with technology-neutral market-based instruments, e.g., carbon taxes and cap-and-trade. These instruments tend to increase the price of energy, at least initially, which is unfortunate for developing countries; higher energy prices may harm economic growth in energy-importing coun- tries (UN, 2011). The latter is another issue of low- carbon development that must be addressed. Private investors are deterred further because, as markets are politically driven, it is very diffi cult to know how the future market and demand will act in the absence of international binding agree-ments. Governments may have a sudden change of heart. This creates uncertainty, which implies that governments must engage in large-scale mo- bilisation of resources to finance investments in and stimulate demand for low- carbon technolo-gies. 16 Public procurement may be a relevant pol-icy to aid market formation by supplying crucial early demand and reducing consumer uncertainty with demonstration projects. Market formation also involves reducing uncertainty by establishing technical and quality standards. Early niche mar- kets will in turn create a demand for new com- petences in the labour market and education and training systems. In sum, for learning spaces to emerge around low-carbon technologies, govern- ments must create ‘green’ rents to stimulate pri-vate company investment. Micro finance may be another appropriate instrument for supporting demand the demand of the rural poor for low-carbon technologies.
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