Wuppertal Institute Recommends Paradigm Shift for International Climate Policy

Repost from the Wuppertal Institute website

Press Release
Wuppertal Institute Recommends Paradigm Shift for International Climate Policy

Contribution to the European Commission’s stakeholder consultation on the 2015 International Climate Change Agreement

As part of the discussion on a new international climate agreement, which is supposed to be concluded by 2015, the European Commission conducted a stakeholder consultation, to which the Wuppertal Institute contributed. The institute’s submission recommends a paradigm shift for international climate policy.

The contribution by the Wuppertal Institute suggests that Parties should revisit the widely shared assumption that there is a trade-off between climate protection and economic well-being. First, maintaining the current energy system is hardly inexpensive and will tend to become ever more expensive in the future. Already today, the world’s countries each year spend trillions of dollars on subsidies for and imports of fossil fuels. Second, a high share of the necessary reductions can be achieved at a net economic benefit through energy efficiency. Third, the economics of renewable energy-based energy provision are changing rapidly. Renewable energy is already cost-competitive in various settings and the rapid decline of equipment costs through technological progress and increasing market penetration continues. Wind and solar energy will probably be fully competitive in most of the world by the end of the decade. Fourth, in addition to the global climate externality fossil fuel use also causes substantial local externalities, such as local air, water and land pollution, which have to be borne by the public and need to be taken into account in cost-benefit analyses. Fifth, the discussion about risks of carbon leakage is rather disproportionate to the share of national emissions that is actually at risk, and the risk decreases further the more efforts to tackle the climate problem pick up speed globally.

The problem is hence not so much the macro-economic outlook. The problem is that climate policy causes substantial distributional impacts and thus naturally leads to resistance. Those who stand to lose from the low-emission transition have so far managed to dominate the narrative while the innovation impulses and new markets created by climate policy have so far not received adequate attention.

Arguably, a key factor in the framing of the narrative is how commitments are framed. The contribution by the Wuppertal Institute recommends to reconsider the political wisdom of the quantity-based approach that climate policy has so far been based on. As long as emissions are seen as inextricably linked to economic well-being, framing commitments in terms of emission reductions directly triggers the perspective of seeing climate protection as an economic loss. In addition, the approach of turning emissions into a valuable commodity means that quantity commitments are equivalent to giving countries money. These two factors directly give rise to the distributional controversy that has dominated the climate negotiations for more than 20 years. Moreover, adopting quantity commitments is risky for governments as key emission drivers such as economic and population growth are largely beyond their influence. Finally, quantity commitments constitute not only a minimum but also the maximum emission reduction and adjusting commitments promptly once they have been set has proven to be nearly impossible.

Countries should therefore explore other types of commitments that do not trigger concerns of imposing a “cap on development”, that may dovetail more directly with what is seen as being in the national interest, and that are more in line with what governments can actually deliver: implement policies. Commitments should ideally be multi-dimensional. As reducing emissions is a complex problem, it is an adequate approach to tackle it from as many different angles as possible. Possible types of commitments to consider may include scaling up certain climate-friendly technologies, improving energy efficiency, limiting fossil fuel use and fossil fuel extraction, or emission price commitments. Direct emission pricing is economically equivalent to emission trading but does not have most of the drawbacks noted above.

The strongest mobilisation of political support might perhaps be achieved by framing commitments as a joint international undertaking to provide universal access to sustainable energy services by a specific date. A key divide in climate policy is that industrialised countries see climate change from the environmental perspective while developing countries see it from the development perspective. It is in fact in both cases a development issue, as both industrialised and developing countries need to fundamentally (re-)develop their energy systems.

Evaluation of the experience from implementing concrete actions based on systematic monitoring should contribute to shifting opinions about the feasibility of climate protection and thus allow knowledge-based adoption of ever more ambitious commitments step by step.

The document is available for download on the Wuppertal Institute’s publication server.

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