Climate-related Beliefs and Low-Carbon Transition Dynamics

ongoing

The transition to a low-carbon society, as mandated by the Paris Agreement and recent net-zero targets, requires a significant expansion and reallocation of physical investments. Investment choices crucially depend on firms’ expectations and beliefs. However, profound knowledge gaps exist regarding transition-related expectations: current modelling frameworks lack the capability to fully assess their impact on transition dynamics; empirical evidence on their distribution is scarce; and there is limited comprehension of their evolution drivers and how to align them effectively with climate targets. Misalignment of expectations can lead to failed or disorderly decarbonisation pathways. The BELIEFS project will lay the foundations of a novel analytical framework capable of shedding light on the complex interaction between firms’ beliefs, investment decision-making and climate policy strategies, so as to identify credible paths to a net-zero society. The project will deliver a methodological breakthrough by developing a dynamic transition model with a realistic representation of expectations as heterogeneous, evolving and interdependent. The design and calibration of the model will be informed by extensive data collection efforts, including original surveys and experiments. A large-scale survey of firms will produce the first comprehensive empirical assessment of transition-related expectations and their impact on economic decisions. The results of the project will be pivotal in identifying effective policy and institutional strategies to ensure alignment of beliefs, thereby enabling a swift and orderly decarbonisation process. Over the course of five years, BELIEFS aims to offer pioneering interdisciplinary contributions to advance our understanding of the macro-behavioural dimensions of low-carbon transitions, integrating elements from climate economics, transition theory, behavioural sciences and political economy.