Climate policy has been mainly studied with economic models that assume representative, rational agents. However, it aims
at changing behaviour associated with carbon-intensive goods that is often subject to bounded rationality and social preferences,
such as status and imitation. Here we use a macroeconomic multi-agent model with such features to test the effect of various
policies on both environmental and economic performance. The model is particularly suitable to address distributional impacts
of climate policies, not only because populations of many agents are included, but also as these are composed of different
classes of households driven by specific motivations. We simulate various policy scenarios, combining in different ways a
carbon tax, a reduction of labour taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive
products, and green government procurement. The results show pronounced differences with those obtained by rational-agent
model studies. It turns out that demand-oriented subsidies lead to lower unemployment and higher output, but perform less
well in terms of carbon emissions. The supply-oriented subsidy for green innovation results in a significant reduction of
carbon emissions with a slight reduction of unemployment.
Jeroen C.J.M. van den Bergh (UAB), Miklós Antal (UAB)
Proposed alternatives to GDP as a measure of social welfare or human progress are briefly evaluated. Four main categories
are considered: ISEW and GPI based on corrections of GDP, sustainable or green(ed) GDP, genuine savings or investments and
composite indexes. All these alternatives turn out to suffer from various shortcomings. Nevertheless, several of them represent
a considerable improvement over GDP information in approximating social welfare. This gives support to the idea that we should
not wait to give less importance and attention to GDP (per capita) information in public decision making until a perfect alternative
indicator is available.
We raise fundamental questions about macroeconomics relevant to escaping the financial and economic crisis and shifting to
a sustainable economy. First, the feasibility of decoupling environmental pressure from aggregate income is considered. Decoupling
as a single environmental strategy is found to be very risky. Next, three main arguments for economic growth are examined:
growth as progress, growth to avoid economic instability, and growth to offset unemployment due to labour productivity improvements.
For each, we offer orthodox, heterodox and new responses. Attention is paid to progress indicators, feedback mechanisms affecting
business cycles, and strategies to limit unemployment without the need for growth. Besides offering an economy-wide angle,
we discuss the role of housing and mortgage markets in economic cyclicality. Finally, interactions between real economic and
financial-monetary spheres are studied. This includes money creation, capital allocation and trade-offs between efficiency
and operating costs of financial systems. Throughout, environmental and transition implications are outlined.
Energy conservation is widely accepted as an important strategy to combat climate change. It can, nevertheless, stimulate
new energy uses that partly offset the original savings. This is known as rebound. One particular rebound mechanism is re-spending
of money savings associated with energy savings on energy intensive goods or services. We calculate the average magnitude
of this "re-spending rebound" for different fuels and countries. We find that emerging economies, neglected in past studies,
typically have substantially larger rebounds than OECD countries. The effect is generally stronger for gasoline than for natural
gas and electricity. Paradoxically, strengthening financial incentives to conserve energy tends to increase rebound. This
is expected to gain importance with climate regulation and peak oil. We discuss the policy implications of our findings.
We raise fundamental questions about macroeconomics relevant to escaping the financial and economic crisis and shifting to
a sustainable economy. First, the feasibility of decoupling environmental pressure from aggregate income is considered. Decoupling
as a single environmental strategy is found to be very risky. Next, three main arguments for economic growth are examined:
growth as progress, growth to avoid economic instability, and growth to offset unemployment due to labour productivity improvements.
For each, we offer orthodox, heterodox and new responses. Attention is paid to progress indicators, feedback mechanisms affecting
business cycles, and strategies to limit unemployment without the need for growth. Besides offering an economy-wide angle,
we discuss the role of housing and mortgage markets in economic cyclicality. Finally, interactions between real economic and
financial-monetary spheres are studied. This includes money creation, capital allocation and trade-offs between efficiency
and operating costs of financial systems. Throughout, environmental and transition implications are outlined.
Energy conservation is widely accepted as an important strategy to combat climate change. It can, nevertheless, stimulate
new energy uses that partly offset the original savings. This is known as rebound. One particular rebound mechanism is re-spending
of money savings associated with energy savings on energy intensive goods or services. We calculate the average magnitude
of this "re-spending rebound" for different fuels and countries. We find that emerging economies, neglected in past studies,
typically have substantially larger rebounds than OECD countries. The effect is generally stronger for gasoline than for natural
gas and electricity. Paradoxically, strengthening financial incentives to conserve energy tends to increase rebound. This
is expected to gain importance with climate regulation and peak oil. In the last section of the paper, the policy implications
of our findings are discussed.
Ardjan Gazheli, Miklós Antal (UAB), Ben Drake, Tim Jackson (University of Surrey), Sigrid Stagl (WU Wien), Jeroen C.J.M. van den Bergh (UAB), Manuel Wäckerle (WU Wien)
This short paper considers all possible stakeholders in different stages of a sustainability transition and matches their
behavioural features and diversity to policies. This will involve an assessment of potential or expected responses of stakeholders
to a range of policy instruments. Following the Multi-Level Perspective framework to conceptualise sustainability transitions,
we classify the various transition policies at niche, regime and landscape levels. Next, we offer a complementary classification
of policies based on a distinction between social preferences and bounded rationality. The paper identifies many barriers
to making a sustainability transition and how to respond to them. In addition, lessons are drawn from the case of Denmark.
The detailed framework and associated literature for the analysis was discussed in Milestone 31 of the WWWforEurope project.
Ardjan Gazheli, Miklós Antal, Jeroen C.J.M. van den Bergh (UAB)
Traditional economic theory describes economic agents as being perfectly rational. According to this approach, agents possess
all necessary information and have the ability to process this information to make the best decision for maximising their
profit. However, in the real world this assumption does not hold for a number of reasons. First, economic agents are not in
possession of all the information relevant to making decisions and furthermore, information is costly. Second, they do not
have all the computational abilities needed to arrive at optimal decisions. Third, they are boundedly rational and have a
number of other-regarding preferences which influence their choices. Here we provide a list with the most important behavioural
biases of different stakeholders involved in a sustainability transition. This will allow us to improve macroeconomic models
and associated analyses of transition policies.
Miklós Antal, Ardjan Gazheli, Jeroen C.J.M. van den Bergh (UAB)
Writings on sustainability transitions generally do not say much about the particularities of the behavior of individuals
and organisations. This is somewhat surprising since an important problem which transition management needs to tackle is inertia
or resistance to change. Transition policy needs to account for the bounded rationality and social interaction of agents so
as to arrive at a more realistic view of the limits and opportunities for realising a transition. System failures like lock-in,
unpredictability and surprise in innovation systems, and network interaction between agents have received some attention,
but their behavioural underpinnings can be improved. The identification of relevant stakeholders in transition processes and
their unique behavioural features is crucial for understanding how to stimulate transitions. In this paper we investigate
opportunities to integrate various theories and disciplinary views on behaviour into thinking about sustainability transitions
with the aim to arrive at recommendations for more effective policies. For this purpose, we combine insights from the literature
on agency in sustainability transitions, on environmental policy under bounded rationality and social interactions, and on
behavioural foundations of learning and innovation.