What kinds of decisions and policies can best drive the shift to clean energy? This question guided a recent lecture by Ryan Kellogg,聽Ralph and Mary Otis Isham Professor at the University of Chicago鈥檚 Harris School of Public Policy. The event, titled Clean energy subsidies, clean technology policies, and the green transition, was hosted by 蘑菇短视频鈥檚 Sustainable Growth Initiative in partnership with CIREQ. Held on September 18 in 蘑菇短视频鈥檚 stately Faculty Club, with its high ceilings, carpeted floors, and stained-glass windows, the gathering drew a diverse mix of students, industry leaders, academics and professionals. The lecture was part of a broader series on the economics of the environment.
Framing the climate dilemma
For decades, energy policy in high-income countries emphasized affordability and reliability: people wanted cheap, constant power. Kellogg reminded the audience that material well-being is inseparable from energy use. Reliable electricity, heating and cooling are taken for granted in North America, but in countries such as India, energy use is only a fraction of that in the United States. As incomes rise across India and Sub-Saharan Africa, billions will seek the consumption levels wealthier nations already enjoy, driving a massive surge in demand.
The stakes are clearest in hot, rapidly developing regions. In India, demand for air conditioning is climbing at extraordinary rates. Cooling, Kellogg stressed, is not a luxury but a driver of productivity and survival. Mortality from extreme heat is already far higher there than in the U.S., and climate change will only widen that gap. Unchecked warming, he concluded, will be devastating for low-income countries least equipped to bear its costs.
Meeting the trifecta of reliable, affordable and clean energy poses a defining dilemma. Fossil fuels remain the cheapest and most reliable sources鈥攄ense, easy to transport and abundant. Yet continuing down that path deepens the climate crisis.
A shift in thinking
Earlier in his career, Kellogg championed a straightforward economic solution: put a price on carbon, reducing emissions until the cost of abatement matched the damage caused by emissions. His position has since shifted.
He now emphasizes that climate change will impose severe health and mortality costs on low-income countries, strengthening the case for full decarbonization. Emissions reductions from emerging economies are essential, yet justice requires that these countries not be forced into degrowth or denied development.
The challenge, he said, is to make clean technologies attractive enough for emerging economies to adopt. Wealthy countries must take the lead by developing, subsidizing and deploying systems that can be exported at scale. Economists have often resisted demand-side policies such as subsidies and technology standards, but Kellogg argued that these tools are crucial to achieving net-zero emissions.
Testing the 鈥済reen paradox鈥�
In his paper "", Kellogg examines how producers respond to anticipated declines in demand. The idea of the 鈥済reen paradox,鈥� developed by economists Sinclair and Ulph, suggests firms would accelerate extraction before demand collapses. Kellogg鈥檚 models show the opposite. Because drilling requires heavy upfront investment, companies faced with falling demand scale back investment. This disinvestment effect outweighs the impulse to frontload, especially for high-cost resources like shale. His findings show that if demand is expected to decline steadily over 75 years, total extraction also falls, leaving much oil in the ground and driving scarcity rents to zero.
The implication for governments is clear: they should send consistent, long-term signals that demand will fall. Anticipated decline alone can drive disinvestment, countering the green paradox and accelerating the transition.
Designing clean energy policy
Kellogg鈥檚 second line of research, which he laid out in his paper , compares three policy tools: carbon taxes, clean electricity standards (CES), and zero-emission subsidies. Carbon taxes directly price emissions. CES systems require producers of 鈥渄irty鈥� energy to buy credits from 鈥渃lean鈥� producers, while subsidies reward clean generation. Economists have traditionally viewed carbon taxes as the most efficient tool, but Kellogg argued that at 100 percent clean generation, these differences largely disappear.
Reflecting on his career, Kellogg admitted he was once skeptical of subsidies. Now, he sees them as indispensable鈥攂oth to accelerate technology development and to make clean solutions viable for the Global South. He closed by stressing that no single policy can solve the crisis. Achieving net zero will require a mix of tools鈥攃arbon taxes, clean energy subsidies and technology development鈥攁bove all, solutions that make clean energy attractive and viable for developing nations.
Audience questions
During the Q&A, discussion extended well beyond the scheduled time.
One participant asked whether India, like China, has the right to pursue coal-based development. Demand-side policies, they noted, cannot be enforced internationally. Kellogg acknowledged that coal is the larger problem, particularly since India has abundant domestic reserves. Because that coal is locally sourced, raising its price is neither politically feasible nor ethically straightforward. The solution, he argued, lies in technology: funding research to make renewables reliable and inexpensive, and designing grids that can follow wind and solar across regions.
Another question turned to policy design. If no instrument is perfect, which should governments use? Kellogg urged flexibility: carbon taxes, standards, and subsidies all have drawbacks, but should be treated as a toolkit, ready to deploy as circumstances demand. Other questions touched on coal, the green paradox, investment in energy, and related challenges, underscoring the depth of interest in both the economics and politics of the transition.
The event highlighted the complexity of balancing economic growth, equity, and climate goals.聽A follow-up interview on the topic is available on Delve, 蘑菇短视频鈥檚 thought leadership platform, and .
Ryan Kellogg also serves as Deputy Dean for Academic Programs and Faculty Director of the MS in Climate and Energy Policy and is a Research Associate at the National Bureau of Economic Research (NBER) and a former employee of BP. A recognized authority on oil and energy markets, Kellogg鈥檚 research explores energy and economic policy, the climate impacts of energy, industrialization theory, and the design of market-based solutions.
Sustainable Growth Initiative (SGI)
The SGI is dedicated to building practical, constructive, and applies solutions for key issues challenging sustainable growth. SGI was launched in 2022 as a cross-faculty partnership that presently also involves the Faculty of Law, the Department of Economics, and the Max Bell School of Public Policy, the Department of Mechanical Engineering, and the Department of Geography.
