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Investing in low-carbon transitions: energy finance as an adaptive market
journal contribution
posted on 2023-06-08, 23:07 authored by Stephen Hall, Tim FoxonTim Foxon, Ronan BoltonThe amount of capital required to transition energy systems to low-carbon futures is very large, yet analysis of energy systems change has been curiously quiet on the role of capital markets in financing energy transitions. This is surprising given the huge role finance and investment must play in facilitating transformative change. We argue this has been due to a lack of suitable theory to supplant neoclassical notions of capital markets and innovation finance. This research draws on the notion from Planetary economics: Energy, climate change and the three domains of sustainable development, by Grubb and colleagues, that planetary economics is defined by three ‘domains’, which describe behavioural, neoclassical, and evolutionary aspects of energy and climate policy analysis. We identify first- and second-domain theories of finance that are well established, but argue that third-domain approaches, relating to evolutionary systems change, have lacked a compatible theory of capital markets. Based on an analysis of electricity market reform and renewable energy finance in the UK, the ‘adaptive market hypothesis' is presented as a suitable framework with which to analyse energy systems finance. Armed with an understanding of financial markets as adaptive, scholars and policy makers can ask new questions about the role of capital markets in energy systems transitions.
History
Publication status
- Published
File Version
- Published version
Journal
Climate PolicyISSN
1469-3062Publisher
Taylor & FrancisExternal DOI
Issue
3Volume
17Page range
280-298Department affiliated with
- SPRU - Science Policy Research Unit Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2015-11-10First Open Access (FOA) Date
2015-11-10First Compliant Deposit (FCD) Date
2015-11-10Usage metrics
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