- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
It is no longer plausible to avoid the consequences of climate change with the overwhelming global risk for the world economy. However, adapting to climate change and the transition towards a low-carbon economy presents both unique challenges and offers great opportunities.
Many researchers cite the close link between economic growth and carbon emissions. Moving towards a low-carbon economy, however, can still reverse this correlation. This can be initiated through a policy of gradually decoupling carbon emissions from economic growth.
To estimate the total impact of climate change on the economy, various models have been presented and improved to better understand the complexities and uncertainties imposed by the economics of climate change. One of the models - Integrated Assessment Modeling (IAM) has provided a very useful framework for understanding the causes of the problem and has offered various options on how to deal with them. By bringing both physical and social science variables that cover climate change while utilizing political, economic, and demographic data, the IAM claims that the risk of inaction for economies is likely to be much greater than taking bold actions in tackling the negative impact of climate change.
Although the much-argued debate on whether there is a dichotomy between economic growth and the promotion of environmental sustainability, evidence of the monetary impact of climate change on the economy has been highlighted by various studies that offer substantial insight into this trend.
Since the cost of inaction would significantly take the world onto an irreversible path, several climate change mitigation policies, which consider a range of market imperfections, have been suggested for governmental utilization around the globe. The implementation of tax on carbon, the promotion of highly efficient low-carbon technologies, and support for behavioral changes are among the most beneficial tools in meeting the reduction of greenhouse gas emissions, and for climate stabilization goals. As the business as usual option is no longer viable for global economic growth, a policy of reducing carbon emissions would better serve in decoupling energy-related carbon emissions from economic growth.
Establishing carbon pricing, explicitly through taxation and implicitly through regulation, is one of the most vital policy elements in tackling the externalities imposed by those who produce greenhouse gas emissions. The primary idea of carbon taxing tasks those who are responsible for increasing carbon emissions to be held responsible and pay for their action, and therefore, contribute to the overall cost of action for emissions reduction.
The type of economy, whether it operates under low carbon, a high-tech service economy or based on high-carbon growth, and whether a link has been established for climate change with other policy areas, are major determinants of the cost of mitigating greenhouse gas emissions on individuals, entities and in public finances. Nonetheless, it is very important that governments take a fair share of the responsibility to ensure that a steady flow of revenue is allocated in emission reduction policies.
It could be argued that creating a credible carbon-pricing scheme will not be an easy task in the years to come. Additionally, the scaling up of the current carbon-pricing scheme requires closer cooperation between industries and governments.
Carbon pricing can be used to provide incentives for research and development and thus, cut overall costs of low carbon-based technologies, which are relatively costlier than fossil fuel-based alternatives. The World Bank study shows that more than twenty cities, provinces and states already use the mechanism of carbon pricing, equivalent to seven billion tons of carbon dioxide. With the aim of shifting the carbon pricing debate, EY Consulting undertook a survey among energy professionals in 2015 and found that among all the participants, above 50 percent who responded said that carbon pricing is the most effective way of reducing carbon emissions. Nearly half of these respondents - 48 percent stated that companies were in favor of carbon pricing while only 7 percent of companies were against its implication. Among the respondents who were against carbon pricing, a lack of clarity of its implications and methodology created concern, while they were also apprehensive on how to reach a correct and fair price.
In recent years, many of the newest studies have shown that overall costs for new low carbon technologies are lowering. Along with efficiently implemented carbon taxing and regulations, a wide range of low carbon-based technologies is crucial in achieving a reduction in carbon emissions.
Human behavioral changes are another essential tool to foster a shared understanding in dealing with climate change and in making sound decisions both for businesses and consumers. Although to date, this aspect has not been given enough attention in climate policy, behavioral change is becoming more central to international debates in tackling climate change. Extensive research and practice in behavioral changes indicate that understanding social and behavioral aspects of policy making for climate mitigation can be a low cost and effective strategy to cut emissions.
Nevertheless, changing behavior cannot be taken for granted. An effective policy requires a long-term change in habits and values and should consist of not only individuals but systems and social practices across all levels of society. This will ultimately pave the way for the successful transition towards a carbon neutral society. Through effective policy implementation, public health and energy security would be improved, savings in household energy bills would be seen, and new jobs would be created.
Greater cooperation in carbon financing, supported by effective implementation of carbon taxing and with greater technological innovation to serve lower carbon growth, would help break the linkage between economic growth from energy-related carbon emissions. The major challenge is in agreeing on collective action to broaden and deepen the participation of parties for adaptation and mitigation policies. Moving towards a low carbon path, without compromising economic growth, has been proved through the utilization of IAM modeling. Decoupling energy-related carbon emissions from economic growth is the best option for the long term.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.