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Sustainability 2017, 9(12), 2221; doi:10.3390/su9122221

The Role of Sustainable Investment in Climate Policy

1
Global Climate Forum, 10178 Berlin, Germany
2
Faculty of Economics and Social Sciences, University of Potsdam, 14469 Potsdam, Germany
3
State Key Laboratory of Earth Surface Processes and Resource Ecology, Beijing Normal University, Beijing 100875, China
4
School of Sustainability, Arizona State University, Tempe, AZ 85287, USA
*
Author to whom correspondence should be addressed.
Received: 25 October 2017 / Revised: 25 November 2017 / Accepted: 26 November 2017 / Published: 1 December 2017
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
View Full-Text   |   Download PDF [290 KB, uploaded 1 December 2017]   |  

Abstract

Reaching the Sustainable Development Goals requires a fundamental socio-economic transformation accompanied by substantial investment in low-carbon infrastructure. Such a sustainability transition represents a non-marginal change, driven by behavioral factors and systemic interactions. However, typical economic models used to assess a sustainability transition focus on marginal changes around a local optimum, which—by construction—lead to negative effects. Thus, these models do not allow evaluating a sustainability transition that might have substantial positive effects. This paper examines which mechanisms need to be included in a standard computable general equilibrium model to overcome these limitations and to give a more comprehensive view of the effects of climate change mitigation. Simulation results show that, given an ambitious greenhouse gas emission constraint and a price of carbon, positive economic effects are possible if (1) technical progress results (partly) endogenously from the model and (2) a policy intervention triggering an increase of investment is introduced. Additionally, if (3) the investment behavior of firms is influenced by their sales expectations, the effects are amplified. The results provide suggestions for policy-makers, because the outcome indicates that investment-oriented climate policies can lead to more desirable outcomes in economic, social and environmental terms. View Full-Text
Keywords: climate policy; green growth; macroeconomic models; sustainable investment; technical progress; expectations; 1.5 °C climate policy; green growth; macroeconomic models; sustainable investment; technical progress; expectations; 1.5 °C
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Schütze, F.; Fürst, S.; Mielke, J.; Steudle, G.A.; Wolf, S.; Jaeger, C.C. The Role of Sustainable Investment in Climate Policy. Sustainability 2017, 9, 2221.

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