Focus area


Our economic system is rife with market failures and mechanisms that continue to benefit fossil-based activities at the expense of low-carbon and renewable ones.

Public intervention is needed to ensure a level playing field that reflects the real cost of emissions and climate change

This, while promoting market conditions that encourage innovation, deployment, and scaling of net-zero technology by 2050.

In short:

  • Structural market failures and barriers that hinder decarbonisation must be identified and addressed. 

  • Creating the right market conditions to foster low-carbon products is necessary. 

  • Public intervention is essential to create a level playing field based on the real cost of emissions. 

Our economic systems still disproportionately favours fossil-based activities, ignoring the real cost of both emissions and climate change. Persistent market failures that impede climate action, can to an extent be addressed by targeted financial and non-financial public support mechanisms. Others, of a more systemic nature, require market regulation and oversight. 

Ensuring appropriate pricing for emissions that reflects the real cost of climate change is an example of a regulatory measure that can help industries achieve necessary emission reductions. It is also essential to account for potential unintentional consequences or spill-over effects when setting up regulatory measures for markets. Governments and regulatory bodies must have important feedback mechanisms and consultation with the market and larger society to address these challenges and their potential unforeseen ramifications.  

Both financial and non-financial public support mechanisms, regulations and market oversight must contribute to a well-functioning market that fosters innovation through competition.

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Lead Markets 101

The fundamental step of creating green lead markets is to generate a comprehensive CO2-footprint of a good or service in order to identify what is ‘green’ and which products should be pulled to the market. To ensure alignment with carbon neutrality goals, such a system needs to account for the whole lifecycle carbon of a product and include both the ‘operational carbon’, so the CO2 emitted during the use of a product, and the ‘embodied carbon’. The latter refers to the CO2 from input materials and processes going into a product, as well as the emissions resulting from products’ refurbishment and end-of-life treatment. 

The people involved

Lina Strandvåg Nagell

Senior Manager Projects & EU Policy

Hanna Biro

Policy Advisor

Francesco Lombardi Stocchetti

Policy Advisor, Sustainable Finance & Economy

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