United States Study: Combining Subsidies and Pollution Charges Is Most Effective Route to Deep Emissions Cuts

A new empirical modeling study by researchers at UC San Diego and Princeton evaluates how different policy mixes alter the trajectory of energy-sector emissions and the costs of decarbonization. The team compared persistent clean-energy subsidies, broad carbon pricing, sequenced combinations where incentives precede penalties, and politically inconsistent stop-start support. Results indicate subsidies are the main driver of rapid uptake for technologies such as electric vehicles, rooftop solar, heat pumps, and domestic battery manufacturing, enabling fast local deployment where payback is clear. However, subsidies alone fail to produce decisive contraction of entrenched fossil-fuel industries without complementary punitive signals that change long-term profitability; economy-wide penalties compress the fossil sector and accelerate structural shifts. The researchers stress that predictability and continuity of incentives matter as much as their size; reliable support reduces investment uncertainty and locks in infrastructure and supply-chain commitments, whereas stop-start programs raise future decarbonization costs. The study further highlights that optimal policy mixes are technology- and institution-specific: modular, permissionless technologies (rooftop PV, two-wheeled EVs) scale rapidly with targeted deployment support, while system-level interventions (transmission expansion, large-scale pumped hydro, district heating) require coordinated planning and finance that benefit from sustained central commitments. Grid constraints, long-duration balancing needs, and industrial substitution pathways shape how quickly different sectors can decarbonize, so sequencing—front-loading deployment where low coordination costs exist and aligning later economy-wide pricing to shrink incumbents—yields the best modeled outcomes. The paper also examines behavioral politics, noting that mandate design and perceived effectiveness influence public acceptance and compliance. Policy implications for the United States include tailoring incentive design to local governance capacity, ensuring durability of support to avoid asset lock-in, and communicating credible plans for future pricing or regulation to reduce investor uncertainty. For investors and regulators, the message is that predictable, sequenced policies matched to institutional context lower transition costs and reduce the need for abrupt regulatory corrections later.