12.4 Climate Change Politics and Global Economic Policies

Climate change is a pressing global issue driven by human activities, primarily burning fossil fuels and deforestation. The greenhouse effect traps heat, causing rising temperatures and atmospheric CO2 levels, with significant impacts on the planet.

International climate negotiations, led by the UNFCCC, aim to address this challenge. Key agreements like the Kyoto Protocol and Paris Agreement reflect the complex dynamics between developed and developing nations, as well as industry interests.

Climate Change Science and Impacts

Scientific basis of climate change

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• Greenhouse effect traps heat in the atmosphere due to greenhouse gases (GHGs) like carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O)
• Anthropogenic GHG emissions have increased significantly since the pre-industrial era, primarily from burning fossil fuels (coal, oil, natural gas) and land-use changes (deforestation)
• Atmospheric concentrations of CO2 have risen from ~280 ppm in the pre-industrial era to over 410 ppm today
• Global average surface temperatures have increased by ~1.1℃ since the pre-industrial era, with most of the warming occurring in the past 40 years

Political economy of climate negotiations

• United Nations Framework Convention on Climate Change (UNFCCC) established in 1992 as the main international forum for climate negotiations
  • Kyoto Protocol (1997) set legally binding emissions reduction targets for developed countries, with flexibility mechanisms like emissions trading and the Clean Development Mechanism (CDM)
  • Paris Agreement (2015) adopted a bottom-up approach with Nationally Determined Contributions (NDCs), aiming to limit global temperature increase to well below 2℃ above pre-industrial levels
• Positions of major actors reflect their economic interests and historical responsibilities
  • Developed countries, responsible for the majority of historical GHG emissions, have greater capacity to finance mitigation and adaptation efforts
  • Developing countries emphasize their right to sustainable development and need for financial and technological support from developed countries
  • Fossil fuel industry lobbies to influence climate policy and resists transitioning away from fossil fuels to protect their business interests

Effectiveness of climate policies

• Carbon pricing puts a price on GHG emissions to incentivize reduction
  1. Carbon taxes set a direct price on emissions, with revenue that can be used for climate action or redistributed to households
  2. Emissions trading systems (ETS) set a cap on total emissions and allow trading of emission allowances, encouraging cost-effective reductions (European Union ETS)
• Fossil fuel subsidies reform involves phasing out subsidies for fossil fuel production and consumption, reallocating funds to clean energy and climate action
  • Globally, fossil fuel subsidies amounted to $320 billion in 2019, diverting resources away from climate action and distorting energy markets
• Green finance mobilizes private capital for low-carbon investments through instruments like green bonds, sustainability-linked loans, and environmental, social, and governance (ESG) investing
• Challenges in policy effectiveness include lack of global coordination and ambition, carbon leakage and competitiveness concerns, and distributional impacts and political acceptability

Role of climate finance

• Climate finance supports mitigation and adaptation efforts, particularly in developing countries
  • Green Climate Fund (GCF) is a UNFCCC mechanism to support projects in developing countries, with a goal to mobilize $100 billion per year by 2020
  • Multilateral development banks like the World Bank and regional development banks mainstream climate considerations in lending and technical assistance
  • Bilateral and national climate funds provide targeted support for specific countries or sectors
• Technology transfer involves sharing low-carbon and climate-resilient technologies (renewable energy, energy efficiency, climate-smart agriculture) and providing capacity building and technical assistance
  • Intellectual property rights and technology access can be barriers to effective technology transfer
• Adaptation finance supports vulnerable communities in adapting to climate change impacts through measures like infrastructure resilience, early warning systems, and climate risk insurance
• Challenges in climate finance include inadequate scale relative to needs, difficulty in accessing funds (particularly for least developed countries), and need for capacity building and enabling environments