An evolving risk perspective for policy instrument choice in sustainability transitions

•We apply financial risk, transaction cost, innovation and social welfare considerations to sustainability transitions.•We analyze optimal choice between price and quantity instruments for support of emerging technologies.•The dynamic nature of risk implies changes in optimal instrument choice during sustainability transition process.•Price instruments seem optimal at first, then quantity control could take over with flattening marginal costs.•Solar PV in Germany as case, where auctions (a form of quantity control) succeeded feed-in tariffs (price instrument).