As the world enters a punishing economic downturn, the urgent task of engineering an energy revolution seems more difficult. The growth of “green” industries could play a big role in economic recovery. But mounting budget deficits will squeeze governments’ ability to find the cash for more subsidies and make them wary of inflicting further damage on hard-hit industry and consumers by ratcheting up the price of carbon.

So far, the growth of green energy sources has owed relatively little to governments’ faltering efforts to put a price on carbon. The most dramatic strides in green technology have been achieved using less cost-effective but more politically palatable tools: principally investment tax credits, subsidies and price supports, such as feed-in tariffs for renewable energy.