Types Of Climate Policies And Agreements

While there is a great deal of complexity and nuance involved in policy assessment, the IPCC (Gupta et al., 2007) concludes that there is "high agreement" and "much evidence" to support a number of conclusions about the major kinds of national policies that have been proposed and in some cases implemented to limit climate change. The IPCC also points out (see Table 17.1):

• Direct regulation, when enforced, can reduce emissions.

• Taxes are cost effective but do not guarantee a particular level of emissions reductions and are hard to adapt and adjust.

• The environmental effectiveness and cost effectiveness of tradable permits depend on the structure of the policy, including the number of permits issued, how they are distributed, and whether permits can be banked.

• Voluntary agreements between industry and government have played a role in the evolution of national policies and have accelerated adoption of best available technology but have not achieved significant emissions reductions.

• Subsidies, support for public research and development, or other incentives to develop and adopt new, low-emitting technologies, when used alone, have higher costs than other approaches; however, these strategies can complement policies targeting emissions directly via market mechanisms and enhance their overall environmental and cost effectiveness (this is particularly important when markets alone fail to achieve needed reductions in emissions; see also Jaffe et al., 2005).

• While information programs alone do not seem to lead to substantial emissions reductions, they can improve the effectiveness of other programs.

• A well-designed mix of policy types can be more effective than a single "pure form."

The companion report Limiting the Magnitude of Future Climate Change (NRC, 2010c) contains an extensive analysis of the advantages and disadvantages associated with different climate change policy options for reducing U.S. GHG emissions.

At the international level, climate policies have been codified in the UNFCCC and the Kyoto Protocol. Policies for limiting the magnitude of climate change are implemented through a variety of mechanisms such as the Clean Development Mechanism (CDM) and Joint Implementation. While experience with climate change treaties is limited, there is a substantial literature examining other environmental agreements that can provide insights of relevance to climate treaties (e.g., Biermann et al., 2009b; Mitchell, 2003; Young, 2002a,b, 2008, 2009). Drawing on this evidence, the IPCC (Gupta et al., 2007) concludes that there is, as with national-level policy instruments, "high agreement" and "much evidence" to support a number of conclusions about international treaties. The Kyoto Protocol has stimulated national policies and the creation of carbon markets, but its economic impacts are not clear, and its overall ambition with regard to emissions reduction has been limited. There is broad agreement in the literature that, to be successful, a successor agreement to Kyoto will have to be both environmentally effective and cost effective, take account of distributional and equity considerations, and be institutionally feasible (Aldy and Stavins, 2007). These goals are most likely to be achieved if the agreement incorporates goals, specific actions and timetables, rules for participation, and institutional arrangements and provisions for reporting and compliance. Of particular importance are the extent of engagement by national governments and the stringency and timing of the goals (Gupta et al., 2007).

TABLE 17.1 National Environmental Policy Instruments and Evaluative Criteria



Environmental effectiveness


Meets distributional considerations

Institutional feasibility

Regulations and Standards

Taxes and charges

Tradable permits

Emission levels set directly,though subject to exceptions Depends on deferrals and compliance

Depends on ability to set tax at a level that induces behavioral change

Depends on emissions cap,participation and compliance

Depends on design; uniform application often leads to higher overall compliance costs

Better with broad application; higher administrative costs where institutions are weak

Decreases with limited participation and fewer sectors

Depends on level playing field; small/new actors may be disadvantaged

Regressive; can be improved with revenue recycling

Depends on initial permit allocation, may pose difficulties for smal emitters

Depends on technical capacity; popular with regulators, in countries with weakfunctioning markets

Often politically unpopular; may be difficult to enforce with underdeveloped institutions

Requires well-functioning markets and complementary institutions

Voluntary agreements

Subsidies and other incentives

Research and development

Depends on program design,including clear targets,a baseline scenario,third-party involvement in design and review,and monitoring provisions

Depends on program design; less certain than regulations/standards.

Depends on consistent funding, when technologies are developed,and policies for diffusion. May have high benefits in long term

Depends on flexibility and extent of government incentives, rewards and penalties

Depends on level and program design; can be market-distorting

Depends on program design and the degree of risk

Benefits accrue only to participants

Benefits selected participants; possibly some that do not need it

Initially benefits selected participants; potentially easy for funds to be misallocated

Often politically unpopular; requires significant number of administrative staff

Popular with recipients; potential resistance from vested interests. Can be difficult to phase out

Requires many separate decisions; depends on research capacity and long-term funding

NOTE: Evaluations are predicated on assumptions that instrumentare representative of best practice rather than theoretically perfect.This assessment is based primarily on experiences and literature from developed countries, since peer-reviewed articles on the effectiveness of instruments in other counties were limited. Applicability in specific counties, sectors,and circumstances—particularly developing counties and economies in transition—may differ greatly. Environmental and cost effectiveness may be enhanced when instruments are strategically combined and adapted to local circumstances. SOURCE: Gupta etal.(2007).

The IPCC (Gupta et al., 2007) notes that a large number of actions are being undertaken to reduce emissions by corporations, by local and regional governments (including U.S. states), and by nongovernmental organizations. It concludes that there is "high agreement" and "much evidence" that these actions have some effect on emissions and stimulate innovative policies and technologies but generally have limited impact in the absence of national policies.

On the adaptation side, as mentioned earlier, the UNFCCC and the Kyoto Protocol support adaptation planning and action through the National Adaptation Programmes of Action for 49 Least Developed Countries and have created the Adaptation Fund "to finance concrete adaptation projects and programmes in developing country Parties to the Kyoto Protocol that are particularly vulnerable to the adverse effects of climate change."1 The Adaptation Fund is financed from a share of proceeds from the CDM and from other sources of funding.

There are many challenges to effective adaptation policy. These include: (1) cross-scale integration of decision making; (2) removal of legal and institutional barriers at higher levels of governance that may inhibit policy decisions at lower levels of governance; (3) unfunded mandates, lack of clarity about authority, and lack of mechanisms for cross-scale and cross-sector coordination and collaboration; (4) effective linking of science and decision making across levels; (5) identification of efficiencies, co-benefits and potential negative feedbacks among adaptation options and between mitigation and adaptation efforts in various sectors and across levels; and (6) the monitoring and evaluation of implementation of policies occurring (and depending on actions) at multiple levels (e.g., Adger et al., 2009b). The Adapting panel report (NRC, 2010a) discusses many of these issues in detail.

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