HIGHLIGHTS FROM Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development

The document outlines a framework called 'Planetary Economics' to address the inadequacy of traditional neoclassical economics in solving climate change. It proposes three domains of socio-economic processes: the First Domain (Satisficing), focusing on human behaviour and efficiency gaps; the Second Domain (Optimising), focusing on market trade-offs and pricing; and the Third Domain (Transforming), focusing on innovation and systemic change. These domains map to three policy pillars: standards and engagement for efficiency, markets and prices for carbon reduction, and strategic investment for infrastructure and innovation. The author concludes that only an integrated strategy combining all three pillars can effectively decarbonise energy systems and overcome systemic 'lock-in' and behavioural inertia.

• Traditional neoclassical economics is insufficient for climate policy because it focuses on trade-offs and costs of constraints rather than the systemic transformations and opportunities created by change.
• The 'First Domain' of socio-economic processes involves 'satisficing' behaviour, where an 'efficiency gap' exists because people and organisations consume more energy than necessary due to habits, inertia, and structural barriers.
• The 'Third Domain' concerns the evolution of the technology frontier through innovation, infrastructure, and institutional changes, which are often subject to 'lock-in' where existing fossil fuel systems perpetuate established interests.
• Pillar I policies targeting energy efficiency are highly cost-effective, particularly in buildings—which account for over a third of global energy consumption—but are often limited by 'rebound effects' and slow uptake.
• Pillar II focuses on carbon pricing via taxes or cap-and-trade to internalise environmental damages, though it faces challenges such as 'carbon leakage' where production moves abroad to avoid pollution costs.
• Pillar III requires strategic public intervention and up-front investment to overcome the 'technology valley of death' and shift the estimated $50 trillion needed for global energy needs over the next twenty years away from fossil fuel dependence.
• Effective climate action requires an integrated strategy across all three pillars; relying on any single pillar is unstable, as pricing is politically unsustainable without efficiency options and innovation drivers.

APA

Grubb, M., Hourcade, J.-C., & Neuhoff, K. (2015). HIGHLIGHTS FROM Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2017/03/Planetary-Economics-Highlights-1.pdf

Chicago

Grubb, Michael, Jean-Charles Hourcade, and Karsten Neuhoff. HIGHLIGHTS FROM Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development. Climate Strategies, 2015. https://climatestrategies.org/wp-content/uploads/2017/03/Planetary-Economics-Highlights-1.pdf.

Wikipedia

{{cite report |last1=Grubb |first1=Michael |last2=Hourcade |first2=Jean-Charles |last3=Neuhoff |first3=Karsten |title=HIGHLIGHTS FROM Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development |publisher=Climate Strategies |date=July 2015 |url=https://climatestrategies.org/wp-content/uploads/2017/03/Planetary-Economics-Highlights-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{grubb2015highlights, author = {Grubb, Michael and Hourcade, Jean-Charles and Neuhoff, Karsten}, title = {{HIGHLIGHTS FROM Planetary Economics: Energy, Climate Change and the Three Domains of Sustainable Development}}, institution = {Climate Strategies}, year = {2015}, month = jul, url = {https://climatestrategies.org/wp-content/uploads/2017/03/Planetary-Economics-Highlights-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }