Report on the optimal policy mix in a global general equilibrium setting

The ENTRACTE research project aims to analyse the European climate policy portfolio with special emphasis on the role of interactions between different policy instruments. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

Additional market failures beyond the climate externality, in particular regarding the innovation process, need to be addressed with specific instruments within a cost-efficient climate and energy policy. This is key to reduce long-term decarbonisation costs. This report examines instruments such as R&D and learning-by-doing subsidies to induce innovation and reduce the costs of renewable or efficient energy technologies.

Author: Oliver Schenker, Jan Witajewski