energy idea innovation on climate policy

By Matthew Stepp and Amanda Kibbe, Center for Clean Energy Innovation

In 2012, Jesse Jenkins and Matthew Stepp took stock of the global climate policy challenge in an online series titled The Future of Global Climate Policy. Since then the Intergovernmental Panel on Climate Change (IPCC) completed its Fifth Assessment and many countries are taking stock of their existing—and some argue, failed—climate policies. Looking to the future, the latest round of international climate negotiations is set to close in Paris at the end of 2015, potentially offering the end of one era of global climate policymaking and the start of something new. With an eye on the long-term impacts of the 2015 negotiations, Amanda Kibbe and Matthew Stepp take an updated look in a five-part series on the state of the climate challenge. Part 1, Part 2, Part 3, and Part 4.

Society must act quickly to implement policies that provide the world the tools it needs to cut carbon and put the world on a path for deep decarbonization. The more time we let pass without aggressive action, the higher the cost of mitigation and the harder the task (though it’s already monumentally difficult). Given what we know about the impacts of global warming, the limited pathways the world has towards solving it, and the costs and limitations of doing so, are current policy approaches adequate? If not, what else could the world do?

To recap, the IPCC argues global carbon emissions must be limited to around 450 ppm by 2100 to keep temperatures from exceeding 2°C of warming. This requires a 40 to 70 percent reduction in carbon emissions by 2050, and a precipitous drop to near-zero by 2100. Achieving this means tripling or quadrupling the amount of zero and low-carbon technologies by 2050. More likely than not, carbon emissions will “overshoot” 450 ppm, requiring the world to not only transform to a clean energy economy, but also deploy carbon removal technologies.

Factoring in the low likelihood of a global carbon price and the significant technological and cost challenges limiting clean energy technologies, the cost of mitigating climate change could potentially be higher than the ideal IPCC projections highlighted by climate advocates without significant policy reforms and investments.

Nonetheless, the international climate community continues to march down tried, failed, and staid policy pathways. For nearly three decades, climate advocates and policymakers have sought certainty to address climate change. Carbon caps are favored because they purportedly map out measurable future carbon reductions. Subsidies for existing technologies provide immediate certainty that clean energy is deploying today, rather than clean energy being some hopeful future.  And carbon pricing provides a simple policy mechanism many argue will re-orient economies to address climate change while avoiding governments “picking winners,” providing advocates a useful bumper-sticker policy to build bipartisan support. These policies underpin much of the lead-up discussions to the international climate negotiations set to conclude in Paris in 2015.

The reasons why these approaches have failed are numerous and pervasive, but two are most important.

  1. The climate policy community has mistakenly equated reducing the price of clean energy with reducing its cost for too long.  Policies have focused on reducing the relative price of energy technologies through subsidizing clean energy or increasing the price of fossil fuels. Unfortunately, governments are scaling back on subsidies because of economic concerns and a growing understanding of their long-term, limited impact on innovation. As a result, clean energy still remains more expensive than fossil fuels, particularly when factoring in the high-cost of energy storage.

  2. The climate policy community has treated climate change as a narrow pollution problem, counting on targets for reduced consumption to solve the problem, particularly when alternative clean energy technologies are more expensive.  Unfortunately the climate challenge is much more complicated—it should be seen as an historic technological challenge requiring immediate action incomparable to previous energy transformations.

As a result, climate policymakers often assume that the market will serve technology development and clean energy innovation at the behest of targets, prices, and scaling of current technologies. Unfortunately, this largely ignores the past century of breakthrough innovations, which shows the significant and coordinated innovation ecosystems and strategies that underpin rapid technological advancement.

This policy neglect shows, not only in the lack of global carbon reductions, but also in our climate policy choices. For instance, according to the International Energy Agency, the world underinvests in clean energy RD&D by at least $70 billion a year, or 13 percent of fossil fuel subsidies and 27.5 percent of clean energy subsidies. The IPCC takes it a step farther and argues that RD&D funding should reach $115 billion to $126 billion per year by 2030. Global investments are currently less than 20 percent of this goal, totaling roughly $21 billion per year. Similar gaps in innovation policy exist in our public institutions, deployment subsidies, and international financing mechanisms.

Considering climate mitigations costs dramatically increase if limited low-carbon technologies are available, it’s startling such a fundamental policy gap exists.

Fortunately, a window of opportunity for reform is open now through the end of 2015. Representatives from over 196 countries will descend upon Paris, France late next year to complete a new international agreement on climate change to replace the Kyoto Protocol in 2020. Early indications are that negotiators will rely on many of the tried-and-failed approaches of the previous decades, potentially locking the world into dangerous global warming. It certainly doesn’t have to be this way, but significant changes to the agreement will take a groundswell of support for a productive alternative.

In a new report, Beyond 2015: An Innovation-Based Framework for Global Climate Policy, the Center for Clean Energy Innovation proposes that countries and international institutions implement and coordinate aggressive innovation policies for the next climate agreement. An innovation-based framework requires commitments from high-income countries to increase investments in national innovation ecosystems, commitments from emerging economies to end green mercantilist practices, and commitments from low-income countries to partner with institutions to facilitate technology test-beds that both drive innovation and deliver energy access.

The report builds on the urgency conveyed in the IPCC report, and proposes a series of actionable policy proposals for countries and institutions. Changing the course of international climate policy in 2015 could mean the difference between mitigating climate change and facing its chaotic consequences. All signs point towards the need for more innovation, now it’s up to the climate policy community to act.