Escaping the Climate Trap? Values, Technologies, and Politics Tim Besleyyand Torsten Perssonz November 2020 Abstract It is widely acknowledged that reducing the emissions of green- house gases is almost impossible without radical changes in consump- tion and production patterns. This paper examines the interdependent roles of changing environmental values, changing technologies, and the politics of environmental policy, in creating sustainable societal change. Complementarities that emerge naturally in our framework may generate a “climate trap,”where society does not transit towards lifestyles and technologies that are more friendly to the environment. We discuss a variety of forces that make the climate trap more or less avoidable, including lobbying by firms, private politics, motivated scientists, and (endogenous) subsidies to green innovation. We are grateful for perceptive comments by Philippe Aghion, David Baron, Xavier Jaravel, Bård Harstad, Elhanan Helpman, Gilat Levy, Linus Mattauch, and Jean Tirole, as well as participants in a Tsinghua University seminar, and LSE and Hong Kong University webinars. We also thank Azhar Hussain for research assistance. Financial support from the ERC and the Swedish Research Council is gratefully acknowledged. yLSE,
[email protected]. zIIES, Stockholm University,
[email protected] 1 1 Introduction What will it take to bring about the fourth industrial revolution that may be needed to save the planet? Such a revolution would require major structural changes in production as well as consumption patterns. Firms would have to invest on a large scale in technologies that generate lower greenhouse gas emissions, and households would have to consume goods that produce lower emissions. Already these observations suggest that the required transformation can be reinforced by a key complementarity, akin to the one associated with so- called platform technologies (Rochet and Tirole 2003).