Implementing the Wedge Approach to Climate Change

As the world rapidly reaches consensus on the scientific understanding of climate change, policymakers are increasingly looking at how to address the challenge. There is no doubt that new and especially low-carbon technologies will be essential to the effort. But the sheer magnitude of the climate change challenge often makes it difficult to comprehend how the world might develop effective and efficient solutions.

Princeton professors Stephen Pacala and Rob Socolow introduced the wedge approach as a framework for the climate change dialogue (see earlier article here). In a nutshell, the wedge model suggests several large yet imaginable technology deployments that together could reduce global emissions on the scale we need to avoid the worst effects of global warming.

The wedge model is a compelling way to think about how the world might address global warming, but it begs the question: how do we do it? How can the world deploy low-carbon technologies–both those we have now and those still in development–on a massive scale and with unprecedented speed?

WRI and Goldman Sachs have been working to answer those questions, and today we release the first fruits of that work. The new report, Scaling Up: Global Technology Deployment to Stabilize Emissions, is the first release of a partnership between WRI and the Goldman Sachs Center for Environmental Markets. The multi-year partnership is aimed at designing and promoting the policy and market structures for deploying low-carbon technologies to mitigate climate change.

The Intersection of Technology, Investment and Policy

The report underscores the importance that technology will play in addressing climate change. But beyond that, it identifies the important roles that investment capital and policy design must play in the solution. And most importantly, the report shows how these three areas must coalesce into a coherent vision in order to achieve adequate emissions reductions. For instance:

New technologies cannot be looked at in isolation; they must be viewed in concert with each other and with attendant considerations. For example, hydrogen and biofuels would require a new pipeline and distribution infrastructure, and greater wind power would entail significant upgrades to some electricity transmission grids.
New technologies will not materialize without sufficient investment capital for not only the technologies themselves but for large scale deployment and infrastructure. This will require a significant level of financial innovation.
Sufficient capital depends on the investment community’s role in informing and supporting the necessary policies to stimulate new technology demand.
Poorly designed policies or those that present significant uncertainties are major risks for the investment community and the private sector. That will in turn discourage investment capital and slow technology deployment. On the other hand, well-designed climate policies will create huge opportunities for innovative companies to flourish as new technology markets emerge around the world.

Smart Wedges and Threat Wedges

The original Pacala/Socolow model focuses on technology options that would reduce emissions from business-as-usual (BAU) projections. But there are a number of emerging energy technologies that could have exactly the opposite effect: driving emissions up instead of down. Scaling Up calls these “threat wedges.” They would most likely be driven by concerns about energy security or consistently high fossil fuel prices.

Source: Scaling Up: Global Technology Deployment to Stabilize Emissions, Figure 3.

The implication of threat wedges for policy is that not all emerging energy technologies are desirable from the perspective of climate change, even though they may be attractive for other reasons. For example, coal-to-liquid (CTL) technology might be attractive in China and the U.S. in terms of energy security because of large coal reserves. But its lifecycle emissions are roughly double those of oil-based gasoline. The challenge then is to develop policies that stimulate deployment of clean technologies but that don’t run the risk of encouraging those that would actually cause emissions to rise above BAU projections.