What is the optimal political strategy to effectuate decarbonization of the world’s economy? Professor Jonas Meckling of the University of California-Berkeley, along with several other colleagues at the university, have just published a new article in Science that contends that the key is formulation of green industrial policies that foster “winning coalitions for climate policy.” The two-page piece would be an excellent reading in any energy or climate course’s policy solutions modules.
Among the conclusions of the authors are the following:
1. While climate change agreements increasingly reflect bottom-up, domestically-centered policies, there’s sparse research on the optimal approaches to drive bottom-up processes to effectuate emissions reductions;
2. Even if all carbon pricing mechanisms are implemented globally, they will only encompass 12% of GHG emissions; moreover, because they are subject to the political influence of major polluters, who resist their attendant substantial costs, they are “only marginally effective;”
3. While green industrial policies, e.g. feed-in tariffs and renewable portfolio standards, are viewed by economists as inferior carbon pricing policies from an efficiency perspective, they have the compelling advantage of helping to develop “a political landscape of interests and coalitions” that benefit from such policies. Such “winning coalitions” can also generate positive feedbacks: as such coalitions grow stronger, they can exert more political influence, driving additional pro-climate policies, including carbon pricing policies;
a. Empirical evidence for this thesis comes from Germany, where subsidies for low-carbon demonstration projects and feed-in tariffs ultimately led to expansion of renewable energy projects and other measures; California’s experience also supports this contention
4. Among the policy implications of the study’s findings are:
a. Multiple targeted green industrial policies are beneficial in pursuit of de-carbonization because it provides benefits to firms and households that are “politically bounded and relatively easy to understand — unlike broader more systematic strategies,” such as carbon pricing or urban planning initiatives;
b. Policy signals should maximize political leverage by focusing on specific measures for industrial investment which can drive the development of green industry groups;
c. “Strategic sequencing” of policies is important. High leverage measures of the sort described above help mobilize support and strengthen broader policy signals, such as carbon pricing strategies.
The article could generate some excellent classroom discussion. Among the questions that might be pertinent are the following:
1. In many countries, including Spain, France, Italy and the United Kingdom, feed-in tariff rates have been slashed; does this undercut the authors’ contention that green industrial policies help to develop powerful constituencies that ensure that such measures thrive and expand?;
2. Given the fact that many carbon trading regimes, including the EU-ETS have been criticized for not sending sufficiently strong price signals to drive de-carbonization of economies, are the authors correct when they argue that green industrial policies can help foster strong carbon pricing regimes?;
3. What are the implications of “mixed” climate policymaking regimes, i.e. those that incorporate both green industrial and carbon pricing mechanisms? Would you agree with some commentators that the former can undermine the effectiveness of the latter?