SWS - Study

4.1 Promoting change through regulatory policy

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A stable institutional structure with functioning organisations is, as already mentioned, of crucial importance at national and international level. It sets the necessary political framework conditions to protect and increase common goods (such as social security or our earth's atmosphere). Especially in recent months, the Corona pandemic has once again shown how important it is to make state institutions that guarantee social security, health protection or even basic research in good time "crisis-proof" by providing them with the necessary resources – and how much potential is wasted by weakening multilateral institutions and renationalising politics.


For the socio-ecological transformation of the economy and society, this means: on the one hand, the many possibilities to use existing institutions and structures of our society for a policy of sustainability must be implemented even more consistently53; on the other hand, it would be a dangerous illusion to believe that necessary new institutions are created most effectively when the pressure to act is great enough. Sustainable technologies (such as renewable energies or carbon capture and storage) and mechanisms (such as pricing of climate-damaging emissions and socially appropriate use of the revenues generated) usually require a longer start-up period and good coordination before they can work together effectively at national and international level.54


The introduction of European emissions trading as a political instrument of the EU member states may serve as an example of how a short-term pragmatic climate policy of political feasibility can be combined with a long-term effective instrument55: In order to secure the acceptance of important economic actors, significantly more certificates were initially allocated to companies free of charge in emissions trading than would have been necessary for reasons of international competition protection. In the meantime, however, significantly more allowances are auctioned and the total quantity of allowances has been further reduced, leading to noticeable price increases and steering effects. In a second step it is now important to quickly determine quantities and prices on the basis of scientific data and independently of day-to-day political business, and to also subject emissions that have not yet been recorded (transport, buildings) to CO2 pricing. Only then will it really be possible to achieve the climate goals we are striving for.56 The teething troubles of the EU Emissions Trading Scheme do not per se speak against this political instrument. Experience shows that the critical objections raised by Pope Francis in Laudato si' (LS 171) against emissions trading do not have to be true, provided that they are followed up in a responsible manner.

"In order to ensure the acceptance of important economic players, significantly more certificates were initially allocated to companies free of charge in emissions trading than would have been necessary for reasons of international competition protection."

By now, science has described a whole series of different paths for different groups of countries to introduce an ecologically and socially appropriate CO2 price57. It would be wrong to believe that all countries must agree on the exact details of a common, centrally controlled climate policy. Research shows that multilateral agreements on minimum CO2 prices, supplemented by earmarked transfers for investments in a renewable energy supply that are financed by the Green Climate Fund would be far more promising than global negotiations on exact emission targets.58


This implies s departure from the previous political practice of hoping for global one-size-fits-all solutions for CO2 reduction, but at the same time wanting to control and use financial compensation payments at the national level if possible. The responsibility for the details of CO2 pricing could therefore be more regionalised, for example by the individual states or communities of states deciding whether to achieve the necessary savings through a tax or through emissions trading, which can also be supplemented by a minimum price. The necessary condition for this regionalisation, however, would be the simultaneous introduction of a CO2 border adjustment at the respective external borders analogous to the logic of the value-added tax credit for imports and exports and the strengthening of international solidarity. The establishment and strengthening of appropriate institutions, such as international climate funds, through which compensation payments do not occur as a means of national foreign policy, but according to uniform standards in a precise and efficient manner, would thus not only be a sign of growing international solidarity, but also an act of economic prudence. For this, we do not have to wait for a broad global consensus in the distant future. A "coalition of the willing" that moves forward courageously and coordinates its policy instruments appropriately could trigger a considerable dynamic. If this succeeds, a bundle of coordinated individual measures can quickly develop a broad pull effect and induce other trading partners to introduce similar reduction mechanisms.59


An encouraging example of the potential of such cleverly coordinated initiatives, which can be promoted by different partners, is the "International Platform on Sustainable Finance" under the joint leadership of the European Commission and the People's Republic of China.60 Particularly in the financial sector, however, there is a considerable need for coordination, and not only with regard to climate protection. The European Investment Bank, for example, has stopped financing fossil fuels in the meantime, while many financial institutions closely linked to it still have a lot of catching-up to do. And at the global level, urgent care must be taken to ensure that the countries of the Global South, in particular, are enabled to apply, finance and (further) develop suitable technologies through partnership-based cooperation and, if necessary, to also export them in the future. After all, this is where there is the greatest need for capital and the most cost-effective application potential for the introduction of renewable energies. It is precisely here that the governments, companies and financial institutions of wealthy countries could make an enormous contribution to the common fight against poverty and climate change through technology transfer and financial assistance.61


The European Commission's Green Deal, which was presented shortly before the outbreak of the Corona pandemic, points the way forward in many respects: Protecting the common good in general and the climate in particular not only requires bold investments, but also innovative policy instruments, adequate opportunities for civil society to monitor and participate, and increased international cooperation and solidarity. Under these conditions and in this spirit of partnership, public institutions create the necessary framework through which the recommendations for action described in the following chapters can unfold their full effect.

53 Many important recommendations in this regard can already be found in: Enquete-Kommission „Schutz des Menschen und der Umwelt“ des 13. Deutschen Bundestages (1997): Institutionelle Reformen für eine Politik der Nachhaltigkeit. Springer, Berlin. 
54 Lockwood,M. (2013): The political sustainability of climate policy: The case of the UK Climate Change Act. In: Global Environmental Change, Volume 23, Issue 5, 1339-1348, as well as Pahle, M. et al. (2018): Sequencing to ratchet up climate policy stringency. In: Nature Clim Change 8, 861–867. https://doi.org/10.1038/s41558-018-0287-6
55 Pahle, M. et al. (2018): Sequencing to ratchet up climate policy stringency. In: Nature Clim Change 8, 861–867.
56 Cf. G. Felbermayr et al., Für ein duales System der CO2-Bepreisung in Deutschland und Europa, Kiel Focus 7/19
57 Klenert, D. et al. (2018): Making Carbon Prizing Work for Citizens. In: Nature Climate Change 8, p. 669-677
58 Kornek, U. und Edenhofer, O. (2019): The strategic dimension of financing global public goods. Working Paper. As well as: Cramton, P. et al. (Hrsg.) (2017): Global Carbon Pricing: The Path to Climate Cooperation, Cambridge, MIT Press
59 Mehling, M. A. et al (2018): Linking climate policies to advance global mitigation, Science 359(6379), S. 997–98; as well as: Wissenschaftlicher Beirat beim Bundesministerium für Wirtschaft und Energie (2017): Gutachten zur essenziellen Rolle des CO2-Preises für eine effektive Klimapolitik. 
60 Systemic and Club of Rome (2020): A System Change Compass. Implementing the European Green Deal in a time of recovery. p. 54
61 Ibid. p. 53