Climate Policy Shifts May 2022
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Nations are becoming increasingly serious about climate policy as the effects of global warming worsen and the urgency to reduce carbon emissions intensifies. The world continues to fall short of meeting the ambitious climate goals that the 2015 Paris Agreement set, and fuel shortages and high prices resulting from Russia's invasion of Ukraine are making efforts to phase out fossil fuels more difficult. But the war is also driving policy shifts, which Europe is leading, to accelerate the transition to cleaner and more-secure energy supplies. New climate policies could lead to faster reconfiguration of major segments of global economies, including energy production and distribution, transportation, manufacturing, and agriculture.
A major new report on climate-change mitigation by the UN Intergovernmental Panel on Climate Change warns that nations must collectively reduce their carbon emissions by about 43% by 2030 and stop adding carbon emissions to the atmosphere by the early 2050s to limit global warming to a tolerable level (a rise of 1.5°C above preindustrial levels). Current energy policies will lower global carbon emissions by only a few percentage points by 2030, leading to global warming of about 2.4°C this century.
Nonetheless, nations that account for more than 90% of global GDP have committed to reach net-zero carbon emissions by midcentury. The European Union and several of its member countries, Japan, South Korea, Canada, and New Zealand have legally committed to net-zero targets and are backing their commitments with increased spending on infrastructure and R&D. Many other nations, including China and the United States, have pledged to decarbonize fully, although their commitments are not binding.
Implementation of credible policies to drive an immediate hastening of climate action is necessary for nations actually to meet their net-zero targets. The world has made significant progress toward decarbonization in a few areas with backing from mandates and subsidies. But an analysis by Climate Action Tracker indicates that progress is lagging in each of the 40 climate indicators necessary to limit global temperature rise to 1.5°C. Some specific examples of lagging progress follow.
- Phasing out coal-based electricity generation (or implementing carbon capture and storage) needs to be 5 times faster for the world to move back on track. Adding tree cover, increasing the share of low-emission fuels, and restoring coastal wetlands need to be 3 to 12 times faster.
- Reducing the carbon intensity of global cement and steel production requires step-change improvements to move back on track. Increasing the industrial use of electricity, raising crop productivity, and reducing consumption of ruminant meat are also lagging.
- Some indicators—such as the share of trips by private vehicles, deforestation, and greenhouse-gas emissions from agriculture—are worsening rather than improving.
Europe has led the world in implementing aggressive climate policies. The fossil-fuel-supply disruptions resulting from the war in Ukraine are causing EU nations to reassess their energy policies, and a forthcoming plan for EU energy independence will focus on ending imports of Russian oil and natural gas in the short term. In the longer term, the plan will seek to speed up expansion of renewables and green technologies dramatically; however, specific timelines and pathways for new policies remain uncertain because economic priorities are clashing with the need to phase out fossil fuels. Some specific examples of European policies follow.
- Germany's government announced plans to accelerate its transition entirely to renewables by 2035 to eliminate Germany's dependence on Russian gas. However, skepticism is increasing about the political establishment's true commitment to cutting access to cheap Russian energy, which has been the basis of German-industry competitiveness.
- The UK government released a plan to end the United Kingdom's reliance on natural gas, but many people are questioning decisions to ignore energy efficiency and favor expensive new nuclear power over renewables. The UK government is also opening the door to expand domestic oil and gas production.
The world is unlikely to implement substantially more-aggressive climate policies immediately, and limiting global temperature rise to 1.5°C appears to be an unattainable goal. Many nations are likely to strengthen their longer-term policies to avoid the worst-case climate scenarios, which represent serious threats to global economies. However, the future is uncertain, and changing conditions could trigger alternative outcomes. Some examples of potential events that could transform the future of climate policy follow:
- Geopolitical developments. Escalation of the Ukraine war and other global conflicts could further disrupt international relations and drive new sanctions and trade blocs. Worsening fossil-fuel shortages and price shocks could drive faster national commitments to renewables and nuclear power to enhance energy security, although ongoing supply-chain disruptions and shortages of critical materials could complicate efforts to build new infrastructures quickly.
- Political reversals. Political reversals could delay climate action, overriding nations' previous climate-policy pledges. For example, in 2021, Swiss citizens voted to repeal Switzerland's carbon taxes because they opposed paying higher energy prices. And US President Joe Biden recently announced plans to resume oil-and-gas leasing on public lands—reversing a signature climate-related campaign pledge—because of political pressure to reduce gasoline prices. Upcoming elections in the United States and France could lead to major reversals of climate policies. China, the world's largest carbon emitter, is doubling down on its use of coal to help power its economic expansion, even as it also expands its renewables capacity.
- Motivation from severe climate impacts. The rising incidence of climate disasters could expose new energy-supply-chain vulnerabilities. Increasingly severe climate effects might motivate governments and populations to take faster action to reduce carbon emissions because the world can no longer afford the systemic risks of global warming.
- Implementation of targeted policies. Carbon-pricing policies and other nontargeted climate policies can be effective, but they may be insufficient to encourage many consumers to adopt unfamiliar and more-expensive low-carbon technologies. Extreme financial incentives for technologies such as such as heat pumps and electric trucks may be necessary to encourage rapid adoption of the technologies.
- Emergence of technology innovations. Technology innovations—especially in energy sectors that are difficult to decarbonize—could encourage more-aggressive climate policies by reducing the costs of the policies' implementation.