Climate Change Solutions Series - Policy

The Intergovernmental Panel on Climate Change (IPCC) Working Group II report released in February is an urgent call for meaningful action to address climate change. It warns that failure to limit warming to 1.5C will multiply damage to natural systems, reduce the ability for humans, plants and animals to adapt and disproportionately threaten the lives and livelihoods of 3.3 – 3.6 billion people in developing countries.

Unfortunately, the current actions taken and/or pledged by nations has not been nearly sufficient. The independent, non-profit consortium that tracks global climate action, measures it against the goal of limiting warming to 1.5C and provides an ongoing assessment in their Climate Action Tracker, currently projects 2.7C warming by 2100 based on global policies/actions, 1.8C under the most optimistic (but unlikely) scenario with a 95% probability of exceeding 1.5C warming by 2100. Furthermore, their analysis found greenhouse gas emission reduction targets for 2030 submitted by Paris Climate Accord member countries will result in nearly double the emissions required to keep warming below 1.5C.

Clearly much more aggressive, comprehensive policy measures are necessary to close this emission reduction gap and avoid catastrophic climate change. In this post I explore actions taken to address climate change from a policy perspective, discuss major policy strategies adopted at the global, national, and local (U.S.) levels and how these tools may affect long-term emissions, climate change adaptation and associated impacts.

How are countries meeting Paris Climate Accord commitments?

The Paris Agreement has been adopted by 193 member countries (an unnecessary reminder – this dropped to 192 after the trump Administration removed the United States from the PCA one day after assuming office in 2017. A decision thankfully reversed by the Biden Administration.) with a guiding objective of limiting warming to 1.5C compared to pre-industrial levels. Members are required to submit their plans, called Nationally Determined Contributions (NDCs), to reduce greenhouse gas emissions and adapt to climate change impacts every 5 years. Developed countries such as the United States, European Union member states, Japan etc. are also strongly encouraged, but not required, to financially support developing countries via contributions to the Green Climate Fund.

A broad range of policy measures are being utilized to reduce greenhouse gas emissions. Common examples include restrictions on industrial emissions, implementation of carbon taxation or market-based emission cap-and-trade programs, removing subsidies for fossil fuels, incentivizing wind, and solar energy development, reducing deforestation, phasing out fossil fuel powered vehicles and coal-fired power plants.

The level of urgency regarding and commitment to addressing climate change varies widely between countries. Below are two examples of high commitment/urgency (Costa Rica) and low commitment/urgency (Russia). Referenced data and analysis comes via Climate Action Tracker.

Costa Rica

Climate Action Tracker (CAT) rates the policies and actions adopted by Costa Rica as ‘Almost Sufficient’ to limit warming to 1.5C. Only 7 of the 38 countries evaluated by CAT received this rating with no countries current policies/actions deemed completely compatible with meeting the 1.5C warming threshold. Costa Rica has moved aggressively in recent years to reduce greenhouse gas emissions through a moratorium on oil extraction, develop renewable energy sources and restore and protect previously degraded forests critical for carbon capture and adaptation. The robust availability of hydroelectric power and other renewable energy sources enabled Costa Rica to achieve 100% renewable energy generation for 300 consecutive days and has averaged 98% or more from renewables since 2014.

Russia

It comes as no surprise that Russian policies and actions to address climate change received a ‘Critically Insufficient’ rating from Climate Action Tracker. The Russian economy is heavily dependent on fossil fuels, which accounted for more than 60% of total exports in 2018 and its nationally determined contributions (NDCs) reflect intention to maintain or even expand fossil fuel extraction and export. Little or no effort has been made at the policy level to develop renewable energy sources or reduce domestic greenhouse gas emissions and Russia has not contributed to the Green Climate Fund. CAT estimates nearly 4C warming would result from global adoption of Russia’s climate change policies and actions.

Carbon taxation and cap-and-trade: examples from the United States and Canada

Two policy mechanisms to incentivize reduction of greenhouse gas emissions are a carbon tax and cap-and-trade program.

Carbon tax: the government establishes a price to be paid for each ton of greenhouse gas emitted, either based on quantity produced (for energy companies and other industrial emitters) or emission intensive goods/services such as gasoline (for consumers).

Example: British Columbia, Canada

The province of British Columbia in western Canada introduced an economy-wide tax on carbon in 2008 covering roughly 70% of total emissions. Starting at $10 per ton, the price has scaled up gradually in the years since implementation and is currently $50 per ton. At the consumer level the carbon tax added 9.96 cents per liter to the cost of gasoline. A key feature of the B.C. program is that by law it must be revenue-neutral, and all proceeds from the carbon tax are returned as a low-and-middle income tax cut. In 2020 a middle/low-income family of four received a $1,800 total carbon tax credit. The tax has been successful in slowing demand as fuel use decreased by 16 percent in the five years following implementation, and while emissions rose again in the past few years, analysis showed the increase reduced by 5-12% from what it would have been with no carbon tax.

Cap-and-trade: the government establishes a declining cap on carbon emissions for major sources and industries (i.e. energy producers/suppliers, electricity generators) and issues a set number of emission allowances, applicable facilities must either reduce emissions below the cap and/or purchase allowances to cover remaining emissions or in some cases a limited percentage of emissions can be covered through verified carbon offset projects (i.e. renewable energy development, forest conservation). This system is considered ‘market-based’ as the government generally does not control allowance pricing beyond establishing a minimum price, and facilities trade allowances with each other with pricing based on supply and demand.

Example: California, United States

The state of California passed Assembly Bill 32, the “California Global Warming Solutions Act” in 2006 that required reduction of statewide greenhouse gas emissions to 1990 levels by the year 2020 and a follow-up bill passed in 2018 established an annual declining cap on emissions to achieve reduction goal of 40 percent below 1990 levels by 2030. The California Cap-and-Trade program applies to sources responsible for 85 percent of emissions including electricity generators, industrial facilities and fossil fuel distributors. A key element of the program is that a small percentage of covered entities emission reduction obligation may be in the form of offset projects – 8% through 2020, 4% between 2021 and 2025 and 6% between 2026 and 2030 and 50% of supported projects must directly benefit the state of California (updated in 2021; prior to this change offset projects could be located anywhere in the United States). The program has been successful in several ways, including reducing greenhouse gas emissions as it achieved reduction to 1990 levels in 2016 (four years earlier than stated target of 2020), generating $5 billion in revenue from allowance auctions, of which 35% are required by law to fund projects benefiting disadvantaged and low-income communities and achieving significant public health benefits through reduced air pollution.