A net-zero target compels a backward induction approach to climate policy

Dolphin, Geoffroy; Pahle, Michael; Burtraw, Dallas; Kosch, Mirjam

doi:10.1038/s41558-023-01798-y

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A net-zero target compels a backward induction approach to climate policy

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Dolphin, Geoffroy
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/persons/resource/Michael.Pahle

Pahle, Michael
Potsdam Institute for Climate Impact Research;

Burtraw, Dallas
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/persons/resource/mirjam.kosch

Kosch, Mirjam
Potsdam Institute for Climate Impact Research;

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Dolphin, G., Pahle, M., Burtraw, D., Kosch, M. (2023): A net-zero target compels a backward induction approach to climate policy. - Nature Climate Change, 13, 1033-1041.
https://doi.org/10.1038/s41558-023-01798-y

Cite as: https://publications.pik-potsdam.de/pubman/item/item_28763

Abstract

Jurisdictions worldwide increasingly affirm their contributions to the Paris Agreement by pledging net-zero targets. We argue that delivering on net-zero targets compels a backward induction approach to climate policy, which stipulates that maximizing credibility should be the objective of policy pathways design. This implies choosing policies that strike a suitable balance between building commitment and attaining cost efficiency. Our argument rests on the premise that private investments play a key role for net zero, and that getting expectations right—through credible commitment to a policy pathway—is more relevant than getting the prices right to align the investments with net zero. We sketch the main elements for a regulatory strategy to put this approach into action.