This is because low-carbon options (nuclear and carbon capture and storage, CCS) already exist in the electricity sector, marginal impacts of R&D on energy efficiency are decreasing, and learning effects in renewable energies fade. Even with pricing of GHG emissions and without political uncertainty about the future path of carbon prices, the development and diffusion of Iow-emission technologies would still be less than is socially optimal. An important reason for this conclusion is that firms investing in R&D are typically unable to appropriate all or most of the social returns they generate owing to the public-good nature of knowledge. Much of the social return on R&D investments will acciue as spillovers to competing firms, downstream firms that purchase the innovating firm’s products, or to consumers (Griliches, 1992). Empirical evidence suggests that social rates of return to R&D are substantially higher than private rates of return (Griliches, 1992) and that consequently, R&D investment is below the socially optimal level.