  Conventional economic analysis of stringent climate change mitigation policy
generally concludes various levels of economic slowdown as a result of
substantial spending on low carbon technology. Equilibrium economics however
could not explain or predict the current economic crisis, which is of financial
nature. Meanwhile the economic impacts of climate policy find their source
through investments for the diffusion of environmental innovations, in parts a
financial problem. Here, we expose how results of economic analysis of climate
change mitigation policy depend entirely on assumptions and theory concerning
the finance of the diffusion of innovations, and that in many cases, results
are simply re-iterations of model assumptions. We show that, while equilibrium
economics always predict economic slowdown, methods using non-equilibrium
approaches suggest the opposite could occur. We show that the solution to
understanding the economic impacts of reducing greenhouse gas emissions lies
with research on the dynamics of the financial sector interacting with
innovation and technology developments, economic history providing powerful
insights through important analogies with previous historical waves of
innovation.
