Governments — State authorities can play a major role in motivating the private sector to invest in innovative technologies by providing companies with incentives that are clear, predictable, long term and robust.
A wide range of policies needed — Governments are successfully using a wide range of policies and measures to address climate change, including regulations and standards, taxes and charges, tradable permits, voluntary agreements, subsidies, financial incentives, research and development programs and information instruments. The most effective policy mix will vary from country to country.
Policies to guide investments — Government policies and private sector investment decisions are critical for the more than US$ 20 trillion that is expected to be invested in energy infrastructure between now and 2030 that will have long-term impacts on greenhouse gas emissions.
Removing barriers to innovation — For policies to be effective, governments need to pay special attention to identifying and removing barriers to innovation. These can include market prices that do not incorporate externalities such as pollution, misplaced incentives, vested interests, lack of effective regulatory agencies and imperfect information.
Policies can backfire — Government policies can also be counterproductive. Direct and indirect subsidies for fossil fuel use and agriculture remain common practice, although those for coal have declined over the past decade, particularly in industrialized countries.
Holistic approach — Because no one sector or technology can address the entire mitigation challenge, the best approach is to adopt a diversified portfolio of policies and to address all major sectors.