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Addressing the effects of climate change requires coordinated actions from policymakers and industries across all sectors. When industrial activities align with suitable policy measures and are well-coordinated, they gradually generate a ripple effect. This leads to meaningful and lasting impact over time.
This article examines a recent study by the Potsdam Institute for Climate Impact Research (PIK) in Potsdam, Germany, which analyzed over 1,500 climate policy measures implemented across 41 countries from 1998 to 2022.
The aim is to present the study’s main findings and outline practical strategies that various industrial sectors can adopt to meet global climate goals. These strategies also offer industries a chance to benefit from emerging trends in sustainability.
Shortfalls in global climate goals:
The UN Emissions Gap Report 2022 suggests that by 2030, there is an anticipated annual shortfall of 15 GtCO2e for achieving the 2°C target and 23 GtCO2e for the 1.5°C target. The shortfall is due to two main factors:
- A need for more ambition in the targets set by countries.
- Failure of existing policies to deliver the expected results in reducing emissions.
Of the over 1500 policies, only 63 policy interventions were identified as targeting emission reduction by 0.6 to 1.8 billion metric tonnes of CO2. The most successful stories relate to an effective integration of policies rather than the implementation of isolated measures. For instance, policies involving price-based instruments such as carbon taxes and emission trading schemes proved most effective in reducing greenhouse gases.
Analytical methods and approach:
The study employs a machine learning-enhanced difference-in-differences (DID) approach. The DID method allows for a broad and data-driven search assessment of policy combinations. This provides a more comprehensive and unbiased analysis of effective climate policies.
DID addresses research gaps by identifying well-known and under-researched policies, particularly in less-studied regions. The outcomes offer valuable insights for designing more effective climate strategies.
Successful climate change policies across 41 countries:
The study identifies successful climate change policies implemented in 41 countries, comprising developed, developing, and transitioning economies. It identifies 69 significant breaks in CO2 emissions, as shown in Figure 1.
Fig 1. The map shows successful climate policies implemented across different countries. Only countries with observable “breaks” in CO₂ emissions are included.
UK: The power of policy integration
The UK is a prime example of successful policy integration. In 2013, the UK implemented a carbon price floor alongside the EU’s emission trading scheme (ETS). The policy mix supported by renewable energy mandates, stricter air pollution standards, and the planned phase-out of coal-fired power plants resulted in a sharp decline in emissions from the electricity sector. A similar approach is being proposed for Canada, which is expected to have some effect by 2035.
China: Using market mechanisms in a developing economy
China’s emissions trading system (ETS) was initiated with pilot programs and expanded to a national market in 2021. China gradually reduced fossil fuel subsidies, making renewable energy technologies more cost-competitive. In addition, the government has increased public investment and subsidies for energy efficiency projects.
Germany: Achieving success in the renewable energy sector
Germany’s aggressive expansion of renewable energy through its Energiewende policy framework is a prime example of how technology adoption can positively influence greenhouse gas emissions reduction.
Germany’s feed-in tariff system guarantees long-term payments to renewable energy producers and has been instrumental in increasing the share of the renewable energy mix. The success of Germany’s approach has also involved rigorous energy efficiency standards and investments in grid infrastructure. This ensures that renewable energy can be integrated effectively into the national grid.
The analysis shows that Chile, Finland, the Netherlands, Switzerland, Japan, and India had climate policies that provided significant CO2 emission reductions. However, the analysis did not capture breaks associated with policy mixes for the four major sectors: buildings, electricity, industry, and transport.
Which sectors were the most impacted?
Here’s a breakdown of the impacts of climate change policies on various sectors:
- Buildings sector: The study identified 24 successful emission reductions in the building sector, with an average effect size of 22.7% reduction in emissions. This sector saw the highest number of detected breaks, showing the potential for energy efficiency improvements and building codes.
- Transport sector: In the transport sector, 19 significant emission reductions were detected, with an average reduction of 12.6%. The study highlighted the substantial impact of combining fuel taxes, vehicle performance standards, and public transport investments.
- Industry sector: The industry sector experienced 16 significant breaks, with an average effect size of 18.4%. The data suggests that carbon pricing mechanisms, such as emission trading schemes (ETS), were particularly effective in this sector.
- Electricity sector: Only ten significant emission reductions were identified in the electricity sector, with an average reduction of 26%. The most impactful policies in this sector were those integrating carbon pricing with renewable energy mandates.
Where are we falling short?
Despite the successes highlighted, the research reveals a significant gap between current climate policy initiatives and the reductions needed to meet global targets. Policies’ uneven application and effectiveness across different countries and industries is a key issue. While developed economies have seen success with market-based mechanisms and technology-driven approaches, these strategies have not been effective in developing countries.
Moreover, the research identifies a critical lack of robust evaluation and adaptation mechanisms. Many countries rely on outdated or inefficient policies. This precludes them from opportunities to incorporate emerging technologies and innovative approaches for emission reductions. Such stagnation is of concern given the rapid pace of technological advancement and the increasing urgency to fight the climate crisis.
How can PreScouter help?
PreScouter can guide businesses in several key areas:
- Tailored strategy development: PreScouter can help companies develop customized strategies that incorporate the most effective policy instruments for their specific context.
- Technology integration: PreScouter can assist companies in identifying and adopting the most impactful technologies to reduce their carbon footprint. It includes evaluating the potential of renewable energy, energy efficiency technologies, and other innovations within existing and emerging policy landscapes.
- Policy compliance: PreScouter can work with companies to ensure compliance with current regulations while advocating for more effective policies aligning with global climate goals.
- Monitoring and adaptation: Given the dynamic nature of climate policy and technological innovation, ongoing monitoring and adaptation are crucial. PreScouter can provide continuous support to companies, helping them stay ahead of regulatory changes and technological advances.
