Green premiums are a challenge and an opportunity for climate policy design

Adjusting green public support programmes to green premiums can reduce public spending, yet this is challenged by uncertainty. Underfunding green technologies can delay the green transition, and overfunding them can increase transition costs. Both risks of under- and overfunding can be reduced using responsive adjustments.

To meet the climate goals of the Paris Agreement, countries must transition from emissions-intensive to low-emissions (green) products. This transition requires substantial changes, including moving from combustion engines to electric vehicles, decarbonizing industrial processes to move from emissions-intensive to green basic materials, expanding renewable electricity generation and retrofitting the housing stock.

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Fig. 1: Green WTP for different products (% of product price).
Fig. 2: Relationship between green demand, green premiums and support levels.

Data availability

Source data, code and the complete list of references for Fig. 1 are available under an open-source license (MIT) on Zenodo https://doi.org/10.5281/zenodo.7848415 (ref. 15).

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Acknowledgements

Ideas reflected in this article were discussed with colleagues and draw on previous work under multiple projects. Funding of J.C.R. for supportive underlying analysis is gratefully acknowledged under research grant 29.4293 from the German Federal Ministry for Economic Affairs and Climate Action. We thank P. Stein for research assistance. Furthermore, we thank A. Lederer for English proofreading of the final version. We also used Grammarly, DeepL Write and ChatGPT for English proofreading of earlier versions.

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Authors and Affiliations

  1. German Institute for Economic Research (DIW Berlin), Berlin, Germany

    Till Köveker, Mats Kröger, Karsten Neuhoff, Jörn C. Richstein & Xi Sun

  2. Technische Universität Berlin, Berlin, Germany

    Till Köveker, Mats Kröger, Karsten Neuhoff & Xi Sun

  3. Universitat de Barcelona, Barcelona, Spain

    Olga Chiappinelli

  4. Barcelona Economic Analysis Team (BEAT), Barcelona, Spain

    Olga Chiappinelli

  5. Institute for Resource Efficiency and Energy Strategies (IREES) GmbH, Karlsruhe, Germany

    Oliver Lösch

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  1. Till Köveker
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Contributions

All authors contributed extensively to the work presented in this Comment. T.K. wrote the main text and created the figures. O.C., T.K., M.K., O.L., K.N., J.C.R. and X.S. were involved in conceptual discussions on the Comment and reviewed and commented on the manuscript at all stages.

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Till Köveker or Karsten Neuhoff.

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Köveker, T., Chiappinelli, O., Kröger, M. et al. Green premiums are a challenge and an opportunity for climate policy design.
Nat. Clim. Chang. (2023). https://doi.org/10.1038/s41558-023-01689-2

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  • Published: 26 June 2023

  • DOI: https://doi.org/10.1038/s41558-023-01689-2

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