Technological Neutrality:
A Critical Assessment

Outline

While internal combustion engines powered by fossil fuels are the currently dominant propulsion technology in the transport sector, they are not compatible with the goal of decarbonization. Various alternative propulsion and fuel technologies have been developed. However, not all of these technologies are ready for widespread adoption, and each has its own advantages and drawbacks. A key task for policymakers is to establish a regulatory framework that sets incentives for innovation while also enabling the effective and efficient decarbonization of the transport sector.

In current policy debates, business leaders, academics, and policymakers often cite “technological neutrality” as an important criterion that should inform the design of regulatory instruments. The principle of technological neutrality dictates that policymakers should not “pick winners” in the competition between alternative technologies; rather, market mechanisms should determine which technologies achieve broad adoption, for this will ensure the most cost-effective solutions. An emissions trading system that encompasses all economic sectors is typically cited as an example of technologically neutral regulation. In a narrower transport policy context, the principle of technological neutrality is regularly invoked in debates surrounding CO2fleet limits for cars, trucks, and light commercial vehicles.

Yet, a stringent adherence to technological neutrality poses the risk of delaying the adoption of clean technologies that are compatible with the goals of climate protection. Given the existence of market imperfections and path dependencies, it may be difficult to unseat the combustion engine as the dominant propulsion technology. In this way, a “hands-off” approach might be associated with its own economic inefficiencies while also endangering the achievement of climate protection goals.

In this study, researchers are conducting a critical assessment of the principle of technological neutrality. The central question is: How should technology policy be tailored to ensure the success of the transport sector’s clean energy transition? The study’s authors are not only assessing the climate-policy effectiveness of divergent regulatory approaches, but also their long-term macroeconomic efficiency, including how robust they are to uncertain technological development potentials.