09/01/2024
With current levels of global warming, scientists warn that some catastrophic climate systems “tipping points” are already dangerously close to being triggered. Governments and society must act fast to reduce emissions and adapt to already “baked in” climate impacts. Climate policies need to go beyond the sole aim to reduce emissions, and must also aim to be cost-effective, fair and equitable, politically tenable, compatible with health, social and fiscal policy and aligned with foreign policy concerns.
Climate-related challenges
The COVID-19 pandemic has demonstrated the climate-related opportunities a crisis can bring, such as immense economic recovery spending and capacity for dramatic societal transformations within short time periods as witnessed during COVID-19 lockdowns and through energy-saving behavior during the recent energy crisis. They also bring climate-related challenges to light - misaligned recovery spending, locked-in fossil fuel use, and the disruptive effects of geopolitical tensions. The immense scale and speed of the transformation necessary to reach net zero will have profound implications on public revenues, economic structures and labor markets. If left unaddressed, these aspects could undermine and even derail climate policy ambition. In addition, potential future disruptions, such as the rapidly increasing use and capabilities of artificial intelligence, must be considered in the development of climate policies.
Building climate and economic resilience
The OECD’s flagship initiative “Building Climate and Economic Resilience: Net Zero+” outlines a series of recommendations for a resilient transition to net-zero emissions while building resilience to the impacts of climate change itself. The initiative collates climate-relevant findings from across the OECD’s multidisciplinary expertise - for example on environment, economic and tax policy, financial and fiscal affairs, development, science and technology, and employment and social affairs - to provide cohesive recommendations for making the transition to net zero emissions resilient, and as well as building resilience to the impacts of climate change.
Drawing on a wide range of policy expertise across the OECD, in its first phase, the Net Zero+ initiative collated insights to develop concrete actions for governments to build climate and economic resilience:
Focus policy making on a systems level rather than individual components or outcomes. Systemic resilience implies anticipating future shocks, building buffers to absorb initial impacts, and ensuring that resources are available to invest in recovery efforts.
Do everything possible to limit global warming to 1.5°C with no overshoot. Faster reductions are essential and the shape of the pathway matters.
Ensure that crisis relief and economic stimulus spending are aligned with climate goals and sufficiently targeted. The massive amounts spent on crisis relief and economic recovery over the past few years was an opportunity to accelerate climate action, but more could have been done. We must do better to seize the climate-related opportunities that may come with future disruptions.
Get climate policy basics right, tailoring a mix of price-based and other instruments to regional, national and local circumstances, and greening of public governance. Resilient climate policies must be effective and appropriate to their context.
Mainstream climate change adaptation throughout national policy processes. Exploit synergies between mitigation and adaptation policy objectives while minimizing trade-offs. It’s time to get serious about mainstreaming adaptation into core policy thinking. Climate mitigation and adaptation actions should be leveraged in ways that simultaneously support both sets of policy objectives, for example through nature-based solutions.
Use strategic foresight and anticipating transition bottlenecks. Some obstacles are already clear - such as the cost of capital, critical materials supply, and re- and up-skilling needed for the transition. Foresight processes can tease out other bottlenecks and possible future disruptions and develop forward-looking strategies to deal with them.
The OECD’s modeling of the public finance implications of the net-zero transition shows widely heterogeneous effects across countries and time periods. Address the public finance implications of the net-zero transition through careful fiscal planning, assessing direct and indirect effects of policies, and climate-aligned tax instruments. Existing taxes on fossil fuels generate significant Government revenues. Reaching net zero means these and others will be lost as economic structures shift.
Innovation is essential to bring down the costs of emissions reductions and to reach hard-to-abate sectors. Accelerate innovation through a mission-oriented, outcome-based approach. Target support measures for early-stage innovation and research and development.
To ensure that the net-zero transition is publicly supported, governments must clearly communicate not only why policies are needed, but how they will be implemented and what impacts they may have on households. Carefully assess direct and indirect distributional impacts of climate policy. Communicate clear, accurate and easily accessible information to the public about how policies work. Managing the economic effects of climate policies on people is essential.
Better align financial system policies with climate mitigation and adaptation goals, including improved market practices, alignment of core investment policies, use of responsible business conduct tools, and harnessing the double role of the insurance sector as investor and insurance provider. Reaching net zero will require vast amounts of investment. There will be numerous economic opportunities, but financial markets and the private sector cannot rely on public spending to unlock these.
Their needs and perspectives must be given equal consideration. Recognize the interlink ages between climate and development transitions, drawing on all levels of development co-operation to converge on a global approach that aligns development and climate objectives. Developing countries are both the source of most future emissions and the most exposed to future impacts of climate change.
The net-zero transition will cause some jobs to be lost, but new jobs will emerge. Ensure reasonable labor market flexibility and mobility while promoting job quality and protecting workers. Identify skills needs and bottlenecks and prioritize up- or re-skilling. Helping workers shift between sectors, and ensuring they have the skills needed, is integral to an effective, fair and equitable transition.
However, recent global crises, and those to come, are an opportunity for governments to prioritize building climate and economic resilience - one that should not be missed.
Châu Long (Source: OECD Environment)
(Source: The article was published on the Environment Magazine by English No. IV/2023)
