Can climate policy enhance sustainability?

Abstract

Implementing an effective climate policy is one of the main challenges for the future. Curbing greenhouse gas emissions can prevent future irreversible impacts of climate change. Climate policy is therefore crucial for present and future generations. Nonetheless, one may wonder whether future economic and social development could be harmed by climate policy. This paper addresses this question by examining recent developments in international climate policy and considering different levels of cooperation that may arise in light of the outcomes of the Conference of the Parties held in Doha. The paper analyses how various climate policy scenarios would enhance sustainability and whether there is a trade-off between climate policy and economic development and social cohesion. This is done by using a new comprehensive indicator, the FEEM Sustainability Index (FEEM SI), which aggregates several economic, social, and environmental indicators. The FEEM SI is built into a recursive-dynamic computable general equilibrium model of the world economy, thus offering the possibility of projecting all indicators into the future and of delivering a perspective assessment of sustainability under different future climate policy scenarios. We find that the environmental component of sustainability improves at the regional and world level thanks to the implementation of climate policies. Overall sustainability increases in all scenarios since the economic and social components are affected negatively yet marginally. This analysis does not include explicitly climate change damages and this may lead to underestimating the benefits of policy actions. If the USA, Canada, Japan and Russia did not contribute to mitigating emissions, sustainability in these countries would decrease and the overall effectiveness of climate policy in enhancing global sustainability would be offset.

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Notes

  1. 1.

    A more detailed description of FEEM SI and the general equilibrium model ICES is available in the Supplementary material, while a complete overview of the FEEM SI methodology is in Carraro et al. (2013) and Carraro et al. (2011).

  2. 2.

    We sent questionnaires to 60 experts. Among all responses we selected only those complete and non-contradictory.

  3. 3.

    The following are well-known examples: Human Development Index (UNDP 2015), Environmental Performance Index (Hsu et al. 2016), Wellbeing Index (Prescott-Allen 2001), Global Gender Gap Index (World Economic Forum 2013) and OECD Better Life Index (OECD 2014).

  4. 4.

    The analysis considers only CO2 as the main source of GHGs emissions from fossil fuels combustion.

  5. 5.

    The decision to phase out nuclear power, undertaken by the Japanese government after the Fukushima disaster in 2011, will likely make future emission reduction more challenging without a large deployment of renewable energy technologies (IGES 2012).

  6. 6.

    Rest of the World includes all countries not joining the Convention and few countries which are a part of the Convention but are included in a macro-region because of modelling purposes.

  7. 7.

    In the Low pledges ( global ITS ) scenario the CO2 emission price is 89 US$ per Tons of CO2 for all countries participating in the Kyoto Protocol (excluding China and India); in the High pledges ( global ITS ) scenario, it increases to 109 US$. When introducing the ETS for the sole European market and considering only the low pledges ( Low pledges , EU ETS ), the carbon price remains high (98 US$/T CO2). In the Post-Doha scenario, the price decreases to 73 US$/T CO2.

  8. 8.

    Elaboration from LIMITS Scenario database (public) (Version 1.0.0) https://tntcat.iiasa.ac.at/LIMITSPUBLICDB

  9. 9.

    Including these costs in the present analysis is difficult because the methodology requires an ensemble of several models contributing to an integrated assessment which is out of scope of the paper. The alternative would be to use impact and damage functions related to global warming but these stylised reduced forms are not available yet for the sectors, countries and macro-regions considered in this study.

  10. 10.

    This overall result depends on the subjective weights used in aggregating each component of the sustainability pillars. We acknowledge that aggregating such a heterogeneous set of indicators can be a questionable approach (Commission on the Measurement of Economic Performance and Social Progress (2009). However, our framework aims at capturing the essence of the concepts of sustainability as a synthesis of different dimensions and subjectivity.

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Acknowledgments

This paper is part of the research of the Climate Change Economic Impacts and Adaptation of the Fondazione Eni EnricoMattei. We would like to thank the reviewers for their helpful comments and suggestions.

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Correspondence to Lorenza Campagnolo.

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Campagnolo, L., Carraro, C., Davide, M. et al. Can climate policy enhance sustainability?. Climatic Change 137, 639–653 (2016). https://doi.org/10.1007/s10584-016-1701-6

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JEL Classification

  • Q54
  • Q56
  • C68