Timely and well designed R&D investments in clean energy technologies can lower the costs of the climate transition and create more employment opportunities. A new paper led by the RFF-CMCC EIEE explores investment strategies to reach the goals of the Paris agreement.

Achieving the targets of the Paris climate agreement by transitioning to net zero emissions is spurring a new technological revolution. However, these clean technology innovations require strong development and financing efforts, and will have consequences for the economy and society.

A research led by CMCC and recently published on Nature Communications investigates different research and development (R&D) investment strategies consistent with climate stabilization, focusing on low-carbon technologies and on energy efficiency measures.

The paper shows the urgency and key role of research and development for tackling the impacts of climate change. Using complex economy and climate models, it highlights the need to ramp up investments in low-carbon R&D by up to two thirds in order to attain climate neutrality.

“In this work, we also show that money is not the problem,” says Lara Aleluia Reis, of the RFF-CMCC European Institute of Economics and the Environment (EIEE), and first author of the paper. “There are enough financial revenues to fund the research and development efforts. Indeed, active innovation policies can be designed so as to generate economic benefits by reducing distortionary taxation, such as payroll taxes, thus enhancing job creation.”

This research is the outcome of an international collaboration between scientists from two leading research institutes in climate economics, namely the RFF-CMCC-EIEE and E3-Modelling. Researchers used two complex economy-climate models, one from each of the two institutions, and coupled them for the first time. “This allowed us to get new insights which neither of the models alone would have been able to generate,” said Aleluia Reis, “showing the benefits of research collaborations also for climate policy modeling.”

“This paper shows that timing is of the essence,” said Elena Verdolini, Senior Scientist at the RFF-CMCC-EIEE, and another author of the paper. “Early and steady research, development and demonstration investments are a key component of the policy portfolio to achieve the targets of the Paris Agreement: they promote a virtuous circle of learning-by-doing dynamics leading to lower technology costs.”

“Technological change is the main driver of economic prosperity,” said Massimo Tavoni, the Director of the RFF-CMCC-EIEE, and author of the paper. “This work shows that the climate crisis offers an opportunity to boost industrial and innovation policies and align societal and environmental goals.”