When it comes to climate policy, it seems like pessimism is the only thing that rivals greenhouse gas emissions in terms of volume. Last week, the daily atmospheric content of CO2 popped up over 400 parts per million, pushing the stated goal of keeping worldwide temperatures to a 2˚C increase even further from reach.
Beneath this gloomy surface, however, lies a golden sheen of real policy actions that are paving the way for future action to address the challenges of climate change. California and Sweden are two global trailblazers that are currently implementing robust and aggressive policies to reduce emissions and encourage innovative changes in how their national economies and governments operate. Last Tuesday, Resources for the Future, with Sweden’s Mistra Indigo and the ClimateWorks Foundation, put on a summit showcasing these two first movers in the climate policy world.
The event brought together preeminent thinkers on how cap-and-trade systems should be designed and the implications of different policy designs, and gave thoughts leaders from both countries a chance and share lessons learned, successes, challenges, and ways forward toward improving and strengthening their responses to climate change.
A few important themes emerged throughout the day’s discussions, and they provide useful insights for those looking to design better climate policies in the future.
- First, a mixture of policy mechanisms, including price signals and more traditional regulations, is essential for establishing climate policy programs. Some predict that regulation will be more important to California in the coming years than the price of emission allowances; in contrast Sweden has seen its economy thrive despite a relatively high carbon tax along with regulations. There is weak evidence that innovation responds to prices alone, but engineers, innovators, and even local governments react well to incentives, so a mix of flexible regulations and incentive-based mechanisms could increase the opportunity for greater efficiencies at lower costs.
- Second, climate regulations are closely linked to other environmental regulations. California and Sweden are pioneers in the climate space in part because they were previously pioneers in addressing problems like local air pollution. Moving forward, climate goals and other air quality goals may become more interlinked. In fact, there is some thought that future federal air quality standards may be harder to attain than future GHG reduction goals.
- Third, research and development is integral to success. Current technology can set us on the path to a low-carbon economy, but it cannot get us all the way there. Research and development of new technology in energy generation and transportation may bridge the gap between goals in 2013 and outcomes in 2020 or 2050. That will not happen, however, unless investments are made in the short-term.
The event underscored that the policy efforts commenced by both California and Sweden is extensive, and while they have made great progress, they will continue to face daunting challenges in the future, ones that may be overcome by sharing success stories and lessons learned from being laboratories of environmental protection and innovation.