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Thinking about the Institutional Dimensions of Climate Change Policy

Most economists tend to neglect the institutional and political dimensions of proposed climate change policies, whereas political scientists, policymakers, and stakeholder groups frequently give primary attention to these considerations. This is demonstrated by my recent podcast conversation with Navroz Dubash, professor at the Centre for Policy Research in New Delhi, and a Coordinating Lead Author of the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs. Navroz Dubash fits well within this group, as a respected international expert on the politics of climate change policy and governance, the political economy of energy and water resources, and the regulatory state in the developing world. In addition, he was previously a senior associate at the World Resources Institute and a policy analyst at the Environmental Defense Fund.

In discussing pragmatic frameworks necessary for the implementation of effective climate change policy, Dubash explains why international institutions are absolutely essential.

“Climate change in a sense is now a problem with a clock. We have a ticking clock if you’re going to meet two degrees, and even more so if you meet [the goal of limiting the increase in global temperatures below] 1.5 degrees. It’s not enough for every country to do what they can. We have to be measuring progress against what is determined to be necessary by science. So, we have to have some process through which policies and actions are assessed and evaluated.”

This is where, Dubash says, international institutions and rules have a critical role to play.

“What is the mechanism through which future [emissions reduction] targets translate into current action? There needs to be some kind of interlinking mechanism through which we both decide what target is reasonable, as well as think back to what we have to do today in order to achieve those targets. And if there are obstacles to that action, how we overcome those obstacles? All of those tasks really require institutions,” he says.

I ask Navroz to talk about the differences between China and India, since they are sometimes (incorrectly) lumped together in conversations about climate change. He describes the differences in the context of both countries attempting to reduce their emissions in line with the goals of the Paris Climate Agreement.

“In a sense, China has now over the last 20 years built up its infrastructure to the point where it can start thinking about in a sense what the transition is to a low carbon future. India has actually not built up its infrastructure. And we are an interesting place because our emissions are likely to grow for a while longer in order to meet development needs. Now, the trick is going to be how can India do this with a shallower increase in emissions than China exhibited?,” he says. “To unwind a coal or fossil economy actually will have ripple effects throughout the larger political economy of India. And so that it’s not just the economic costs that matter, but also the transaction costs.”

Navroz Dubash remarks that the long-term potential for climate policy to succeed depends heavily on the internal politics in nations that have voluntarily pledged under the terms of the Paris Agreement to reduce their carbon emissions in coming years.

“I think the positive part of Paris for me was that it essentially recognized that progress on climate change is not going to come because of hectoring or peer pressure at the international level. It’s going to come because national politics in country after country shift, where countries find ways of telling a story about how low carbon futures are good for them economically and can sell that politically to their own people. And Paris basically gave countries space to figure out how to tell that story and make it happen.”

For this and much more, I hope you will listen to my complete conversation with Navroz Dubash, the 31^st episode in the Environmental Insights series, with future episodes scheduled to drop each month. You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program. Previous episodes have featured conversations with:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

A Particularly Valuable Perspective from Europe on COP26

In an essay following my return from COP26 in Glasgow, Scotland, and more recently in a Q&A in the Harvard Gazette, I offered my views on what happened (and what did not happen) at COP26 last month in Glasgow. But given the leadership of the European Union on climate change policy, a European perspective is exceptionally important. Fortunately, in the most recent webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA), we featured a conversation with Dr. Laurence Tubiana, the well-known French economist who was France’s climate ambassador at the time of the negotiations that led up to the signing of the Paris Agreement in 2015. A video recording (and transcript) of the entire webinar is available here.

As you know, in this webinar series we feature leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. In this most recent Conversation, I was fortunate to engage with someone who has had solid experience in at least three of these sectors – academia, government, and the NGO community.

Laurence Tubiana, who received her PhD in economics from the Sorbonne, and served as France’s Climate Change Ambassador during the 21^stUN Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21), when the Paris Agreement was signed, is currently CEO of the European Climate Foundation.

In our conversation, Laurence begins by maintaining that while the recent COP26 talks in Glasgow did not produce any breakthrough pacts, those talks represented a real step forward.

“We are making slow progress…130 countries have committed to a target net-zero [emissions] by 2050 or soon after,” she says. “Very few, almost none, are backed or substantiated by any kind of precise pathway to get there, so that is why short-term action is more important than ever.”

One positive development from Glasgow, Dr. Tubiana reports, was the commitment by the signatories to the Paris Agreement to update their Nationally Determined Contributions (NDCs) in time for COP27, scheduled for next year in Egypt (although it should be noted that the United States, the European Union, and the United Kingdom have subsequently indicated that they would not be producing new NDCs with enhanced ambitions one year from now). As I’ve written in my two previous blog posts, countries agreed to accelerate “efforts towards the phase-down of unabated coal power and inefficient fossil fuel subsidies,” and to try to increase their monetary contributions to developing countries to help them cope with the effects of climate change and make the switch to clean energy.

When I ask Laurence for her thoughts about the prospects for the multilateral development banks to contribute significantly to the climate change fight, Tubiana expresses some doubts.

“The international financial system nowadays is not fit for the problem of the climate challenge we face. We are talking about three to four trillion [dollars] a year in additional investment on the global level for this ecological transition and the international financial system is not responding and maybe cannot respond in this actual form,” she says. “So called ‘green finance’ is around two percent of the global financial markets, so with that we cannot respond [adequately] to the challenge.”

Tubiana lauds the dramatic speech delivered at COP-26 by Barbados Prime Minister Mia Mottley, in which she called upon those nations that have contributed most to global emissions to take immediate responsibility for the climate change challenge and to assist those nations most at risk. Mottley stressed that island nations suffering from extreme weather events every few years do not have the economic capacity to rebuild every time and to pay back the debts they would incur if they tried.

At the end of our conversation, when I ask about grassroots youth climate activism, Laurence Tubiana remarks that she understands their anxieties as they face a very uncertain future.

“They feel that their demonstration in the streets isn’t working enough. Governments aren’t responding to what they’re asking for,” she says. “We are failing them, and we are failing them not only because we aren’t active enough on climate change, but because we don’t offer them the political pathways to participate and make their voices hear in the political system.”

All of this and much more can be seen and heard in our full Conversation here. I hope you will check it out.

Previous episodes in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition,” Joseph Stiglitz’s reflections on “Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery,” Joe Aldy describing “Lessons from Experience for Greening an Economic Stimulus,” Jason Bordoff commenting on “Prospects for Energy and Climate Change Policy under the New U.S. Administration,” Ottmar Edenhofer talking about “The Future of European Climate Change Policy,” Nathaniel Keohane reflecting on “The Path Ahead for Climate Change Policy,” and Valerie Karplus talking about “The Future of China’s National Carbon Market.”

Watch for an announcement about our next webinar. You will be able to register in advance for the event on the website of the Harvard Project on Climate Agreements.

Separating Signal from Noise at COP26

As a follow-up to my recent (admittedly long and nearly comprehensive) essay at this blog about what happened (and didn’t happen) at COP26 in Glasgow, I’m offering today a much briefer Q&A which was conducted by the Harvard Gazette and appeared just yesterday. It hits the top highlights and gets into a few other issues – such as the role of youth activism – more than I did in my blog post. Perhaps you’ll find it of interest.

Kris Snibbe/Harvard Staff Photographer

BY Alvin Powell, Harvard Staff Writer

November 17, 2021

At times it was hard to separate the signal from the noise at the United Nations’ Conference of the Parties on climate change, which ended Friday. The meeting, called COP26, featured new global agreements and protests demanding more action, major announcements from the U.S., China, and others, and denouncements from disappointed activists like Greta Thunberg. For an assessment of what was done, and left undone, the Gazette spoke with Rob Stavins, the Harvard Kennedy School’s A.J. Meyer Professor of Energy and Economic Development and head of the Harvard Project on Climate Agreements, who attended his first COP in 2007 in Bali. The interview was edited for clarity and length.

Q&A with Rob Stavins

GAZETTE: John Kerry declared COP26 a success before it was even halfway done. And Greta Thunberg did the opposite, declaring it a failure. Do you agree with one or the other? Or is that the wrong way to look at this?

STAVINS: Looking at it as success or failure is both simplistic and obscures much of the purpose and function of these annual negotiations. This is a marathon, not a sprint. To continue that metaphor: It’s a relay race and the fundamental thing about an individual Conference of the Parties in any given year is that you don’t drop the baton when you pass it off to the next one. And this was a reasonable pass off to the next Conference of the Parties [to be held in Egypt next November].

If we look at it in terms of the ultimate measure for many, we could add up the Nationally Determined Contributions to global emissions reductions in comparison with the Paris Climate Agreement’s 2 degrees centigrade target or its aspirational target of 1.5 degrees C. Before Paris, we were on a trajectory for 3.7 degrees centigrade of warming this century. With the Paris Agreement’s original round of NDCs, we were on a trajectory of 2.7 degrees centigrade — this is all according to Carbon Tracker, which is an accepted institution that people use for this purpose. Then, with the updated NDCs at Glasgow, we could get to 2.4 degrees centigrade. And then, if you add in all of the statements from countries about net zero emissions by the year 2050, as well as private industry statements, we could be at about 1.8 degrees centigrade.

Greta Thunberg looks at that and says it’s all “blah, blah, blah” to her. When others look at it, they say, “Well, we’re certainly moving in the right direction.” My view is that we will have to see how it plays out [in terms of actual emissions reductions, rather than simply targets and aspirations].

GAZETTE: We heard about several different agreements at the COP: the methane agreement, an agreement on deforestation, and the agreement on carbon tariffs between the U.S. and EU. How significant were those agreements?

STAVINS: Some of them are potentially very important. Certainly, the methane agreement is, with 100-plus countries looking at a 30 percent reduction this decade. But remember there are no teeth for enforcement in these side agreements, and they don’t hold the same status as the Paris Agreement.

GAZETTE: Methane is a much stronger greenhouse gas than even carbon dioxide. Do we have a good grasp on how big a part of the overall problem methane is?

STAVINS: If you look over a very short-time horizon, methane is extremely important because its radiative forcing is much, much greater than carbon dioxide while it’s in the atmosphere. But its lag time in the atmosphere is drastically less than carbon dioxide. The way these are usually compared is to look at something like a 100-year time horizon, and then methane, although it’s important, isn’t like carbon dioxide, which is responsible for the lion’s share of the action anthropogenically.

GAZETTE: How about the carbon tariffs agreement between the U.S. and EU, which would level the playing field between nations whose production costs are higher because of steps to address climate change and those that aren’t taking similar action? Is that potentially beneficial to the U.S. steel and other industries in trade with the EU, or is it strictly a climate-related step?

STAVINS: It’s something that could greatly help with climate change because it could lead to a bottom-up coalition of like-minded countries, starting with the European Union and the United States, but with others possibly joining. Politically, it can have legs because the current wave of economic populism in the United States — a little less so in Europe — is highly correlated with a desire for China-bashing. So that approach could find favor in Congress.

GAZETTE: There was talk about the need to get rid of coal, but the final agreement’s language was watered down, for both that and fossil fuel subsidies. What happened?

STAVINS: There were NGOs and delegations that wanted to have language on phasing out coal, and some would surely have wanted it by a specific year. What came out was phasing down — not out — unabated coal, and what that refers to is carbon capture and storage. Symbolically, it’s very important to many people to have statements about coal, but ultimately the Paris Agreement is about reducing emissions, and individual countries will do it however they can.

GAZETTE: Why are they picking on coal? I know coal is the most polluting of the fossil fuels, but in order to reach the goals that we’re talking about, they all need to be addressed, don’t they?

STAVINS: That’s correct, and carbon capture and storage is conceptually part of the ultimate story, both for coal and natural gas, at least as a transition fuel. A general principle in the economics of environment is that performance standards are better than technology standards, because performance standards leave open which technologies are used and which technologies are used will depend upon national circumstance. Of course, carbon-pricing approaches — carbon taxes or cap-and-trade — are potentially even more cost-effective, but the politics are very difficult in the United States.

GAZETTE: How did the negotiations go on Article 6, which provides guidelines on how emissions reduction programs between countries interact? I know that was something you were particularly interested in.

STAVINS: That was the one part of the action in Glasgow that really was negotiations about implementation of the Paris Agreement, because that was the one part of the Rulebook, which hadn’t been completed. It worked out. Some might describe it as a half-full glass of water. I’ll go for three-quarters full.

There are two important parts of Article 6. One is Article 6.4, which is essentially a continuation of the Clean Development Mechanism — an offset system from the days of the Kyoto Protocol. The other is Article 6.2, which is what I was working on, and it is the crucial accounting mechanism for linkages between different countries around the world and their systems to limit emissions. They can establish linkages, and then firms within those countries can carry out trading. This can lower compliance costs tremendously, and thereby facilitate significantly greater ambition. There were two problematic approaches that were being pushed by some countries, and they wound up in 6.4, but not in 6.2. So, I was relieved and pleased with that.

GAZETTE: There was also the question of the $100 billion for developing nations to adapt to the effects of climate change, plus the loss and damage issue. How did they wind up?

STAVINS: On finance, a commitment was made at the Copenhagen COP of $100 billion per year for developing nations, mainly for adaptation, and the payments were supposed to begin in 2020, but there has been a shortfall. By some measures the commitments — not the payments — are up to perhaps $80 billion per year. Obviously, the developing countries want to get that increased. So, there’s language in the decision out of this Conference of the Parties, which is called the Glasgow Climate Pact, that was voted out at the very end and that urges, but does not require, the developed countries to double their commitment.

The loss and damage issue is quite separate, and debates and discussions on that have been going on for a decade. This is about damages that will take place despite adaptation measures. It’s straightforward to think about adaptation actions and their cost, but the cost of damage is much more difficult to measure because damages are due to things like hurricanes and flooding, which are a result of specific weather events, and it’s just not possible to tie every weather event to climate change. There were hurricanes and typhoons long before we had climate change.

So, the concern of the countries that have contributed most to the accumulated stock of greenhouse gases — the United States, the European Union, and China — is that a loss and damage measure would be a prescription for unlimited legal liability for bad weather. On the other hand, if you’re from one of the most vulnerable countries in the world — in particular the small island states — where climate change is not just going to increase costs of adaptation, but is existential, then it’s absolutely essential to have this. So, the most vulnerable countries — and developing countries more broadly — wanted something to be in the Glasgow Climate Pact. In the end, it was blocked by the United States and other countries on the final day of the talks. Instead, they set up a dialog to continue to do research on this and consider it at future conferences of the parties.

GAZETTE: How did U.S. credibility fare? I know that was one of the big issues with the change in administration.

STAVINS: U.S. credibility, from what I could sense, was more or less maintained. It surprised me that there wasn’t more discussion about it, because people are aware of the political problems the Biden administration has domestically in terms of achieving its targets. I think a lot of delegations were thrilled to have the Biden administration in place because they can actually talk with them, as opposed to the Trump administration, with whom they couldn’t even speak. There was also a joint press conference by Senator Kerry and Xie Zhenhua, China’s climate envoy. People felt very good that China and the U.S. would work together again, although it’s far from being a return to the co-leadership that the U.S. and China had during the Obama years.

GAZETTE: Looking more broadly, is there a threshold that to your mind will be a tipping point toward success? I’m thinking of the apparent increased engagement of the business community recently.

STAVINS: I think there are two important elements, and one is indeed the increased attention and activity of the business community. But the other is the presence of young people. It is absolutely clear that young people feel more strongly, by and large, about climate change and actions to address climate change than do older generations. This was clear with the demonstrations in London and in Glasgow and is true around the world. It’s true if you look at people who are of school age in the United States compared with people who were of school age a decade or two earlier. What we don’t know yet, however, is whether this is a cohort effect or an age effect. If it’s an age effect, then, as these people get older and get into positions of authority, their views may mellow. But if it’s a cohort effect, then these young people as they mature are going to change the world. And, if so, they will change the world not by demonstrating outside of the COP, but by being on the inside. Ten years or more from now, by being the delegates inside the COP, today’s youth will have a marvelous opportunity to change the world. Let’s hope they do so.