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Dimitri Zenghelis is an economist whose research focusses on the macroeconomics of climate change. He is Special Adviser at the University of Cambridge’s Bennett Institute for Public Policy. Here, he describes his present research and the role that CSaP has played in the process.
Reported by Dr Nick Cosstick (Research Associate, Centre for Science and Policy, University of Cambridge)
Traditional economic models and policy frameworks often focus on short-term fluctuations in a global structure which is assumed to remain relatively unchanged over a short period of time. Fiscal, monetary, and policy effects are assumed to work out of the system after a couple of years, and shocks are acknowledged but not considered. However, we know that technological innovations — such as the transition from canals to railways — can produce shocks and changes in trends which have long-term impacts. Such innovations change the direction of the economy but also produce growth through the efficiency and productivity increases they bring. Furthermore, sometimes interventions are needed to overcome inertia in the market and bring about these changes.
The clean energy transition is a modern example of this phenomenon. The inertia in the present system is caused by the existing infrastructure of pipelines, refineries, and power stations but also the lobbying power of the fossil fuel industry. Change is underway, but the success of this change partly relies on the signals we send. The reduction in cost of the technology comes about by economies of scale and learning by doing — meaning that investment is needed to bring the price down. If enough people expect the technology to be cheap and effective, they will behave in a way that makes it cheap and effective. This, in turn, provides an incentive to invest more, causing a reinforcing-feedback loop. Yet, some in the policy world are sending the wrong signal by treating the clean energy transition purely as a necessary cost, rather than an investment which will yield a return.
We set out to challenge this cost-focussed narrative in a report, produced in partnership with CSaP: Is reaching net zero a growth and prosperity plan? This is where CSaP’s network proved vital.
"CSaP and its network — both within the university and across the policy world — was the right context in which to produce this particular piece of analysis."
We knew the view we wanted to challenge and had a broad outline of how to do so, but we also knew that the problem goes beyond technology and economics — it’s also about behaviour, politics, and institutions. We needed to talk to the people who are part of the policy world’s institutional setup: the decision-makers who could ultimately decide which argument to accept. Although I already knew some of the people at the Treasury whom I wanted to persuade, it’s important that the message is disseminated and reinforced more broadly, and CSaP’s Policy Fellows helped with this.
Early in the process, we used CSaP’s network to arrange a series of workshops, which were carried out via the Cambridge Zero Policy Forum. Consequently, the vision behind the report went through several rounds of input and scrutinisation from academics and policymakers. Their inputs were crucial, especially given the scope and breadth of the potential impacts of climate policy, but also the scope and breadth of the insights and expertise required to appropriately assess the issue.
"CSaP's series of lectures, dinners and one-to-one engagements have been critical in sharing understanding of the nature of the problem and of the individuals, incentives, and priorities in different parts of the policy world. I think that's the basic intuition behind this process: it involves sharing information and understanding to overcome barriers to implementing appropriate policies."
I also participated in several panel discussions at CSaP events and met quite a few of CSaP’s Policy Fellows. Every one-to-one meeting I had with a Policy Fellow was very helpful. I met Jenny Bates for an interesting discussion about the international initiatives they’re working on at the FCDO. I had an insightful meeting with the Director of Analysis and Chief Economist at DESNZ. I also met Jonathan Ashworth, who at that time was a member of the Shadow Cabinet. It was a great discussion, and it was fantastic that he was really pushing for change on this issue. It’s important that politicians understand that this is about reinforcing feedback, but also that there’s a strategic dimension to this issue. The Chinese anticipated the way that the electric vehicle market has gone and are set to wipe out European and American car manufacturers — politicians who don’t want to see us fall behind in other industries must act. _________________________________________________________________________________
Listen to Dimitri participating in CSaP's 2024 Annual Conference panel on "Is supporting green investment for the UK really a growth strategy?"
Dimitri Zenghelis
Bennett Institute for Public Policy, University of Cambridge