Anchoring Long-Term Strategy in Near-Term Action
The Paris Agreement calls for the Parties to communicate long-term low greenhouse gas strategies, and these studies of emissions reduction in future decades are beginning to be uploaded to the website of the United Nations Framework Convention on Climate Change.1 Unfortunately, many of those submitted to date are unconnected to near-term components of the agreement, despite the fact that all the paths they consider run through the early cycles of the Paris system of voluntary pledges, and all are dependent on achievements there. The 2015 agreement was reached only after many years of painful experience and skilled diplomacy, and it is likely the most promising emissions control structure that can gain global agreement in the current international context. Its effectiveness is not yet fully demonstrated, however, and successful implementation—not only of the first nationally determined contributions (NDCs) but also of preparations for the longer-term challenge—will be crucial to building confidence in the approach and sustain national commitment. To this end, a nation’s long-term strategy needs to be integrated with its short-term NDC, indicating those actions that, while perhaps not required to meet the current emissions pledge, need to begin now if the long-term strategy is to be plausible.
Most studies of long-term strategy are based on scenarios of technology pathways to deep decarbonization, assuming a goal of CO2 reduction toward zero by midcentury or soon thereafter, as required by the temperature goals of the agreement. They do, of course, provide useful insights even as currently conceived: they clarify the scale of the mitigation challenge, set priorities for future technology development, and indicate the implied changes in a nation’s economic structure and its institutions. But most do not establish a link to current efforts, formulating the national strategy as a plan of action in pursuit of agreed objectives, starting today. Indeed, several of the existing submissions state explicitly that they are not blueprints for action, or that they are not intended to define concrete near-term activities. These strategy efforts could usefully go further and devote greater attention to the policy developments and institutional reforms needed to ease the wrenching economic transition that the technology paths imply, giving particular attention to actions that are urgent because they take a long time to bear fruit.
The potential contribution to the success of the Paris Agreement of linking its long- and short-term components can be seen most clearly in the energy sector. Fossil fuel supply systems are of massive scale, and energy use technologies are integral to all sectors of modern industrial life, so a transition to zero CO2 emissions faces great inertia. Whole new industries must be built—which requires marshaling large-scale financial support, reform of regulatory systems, and (in some cases) efforts to overcome environmental or other public opposition. Other industries must be driven out of the economic system, which will require managing the natural resistance to the stranding of assets—capital, political, and human—along the way.
A nation’s current NDC is the first step in its strategy to accomplish this transition. Or, viewed another way, a long-term low greenhouse strategy begins with the pledge already made. The future emissions path naturally starts there, consistent with anticipated achievements in 2025 and 2030. Then a strategy should seek out those near-term actions not necessarily required to meet the current NDC but implied by the long-term challenge. Research, development, and demonstration, to lower the future cost of low-carbon technologies, is obviously in this category. It is undertaken by many nations to prepare for the long-term challenge, even though unlikely to help meet near-term pledges. It deserves mention in strategy studies. But it is far from the only action that a vision of the long-term challenge may bring to near-term attention, as just three examples will illustrate.
For many countries, near-term action likely is needed to create the policy framework that underlies the energy strategy. As one example, such plans often include an aggressive role for market prices. In the national strategy submissions to date, almost all the paths to deep decarbonization assume implementation of a universal price on CO2 emissions, either by a tax or a cap-and-trade system. Use of a price instrument is a big advantage in these strategies, because it brings the emissions control pressure to every nook and cranny of the economy. In its absence, the required cobbling together of technology- or sector-specific regulations and subsidies will make the transition more difficult to achieve than the strategy implies.
Some countries submitting these strategy documents have CO2 prices in various stages of development (usually covering only subsectors or subregions of the economy), but most do not. And no Party to the agreement has a pricing system with the coverage assumed by most strategy simulations. Experience to date shows that such emissions pricing regimes take time to develop and to have a substantial influence on emissions. When a national emissions price is an essential component of the long-term strategy, therefore, effort directed to its creation would very usefully show up as feature of the near-term national contribution to the Paris objectives.
A second example, which applies to many of the national strategies, is to begin efforts to foster the public acceptance of technologies that are shown to be an essential part of the low-carbon transition but that now face public opposition. Many plans for a transition to zero emissions depend on large-scale carbon capture and storage, and research-and-development programs of several nations are focused on the technical and cost issues of its implementation. Even success in these efforts may not be sufficient to bring these technologies into play, however, because in many jurisdictions geologic storage faces a not-in-my-backyard constraint, or opposition on grounds of environmental risk. Application of this technology, planned for later decades, will be hard to achieve without early efforts to identify these potential barriers and develop programs to reduce them, perhaps through changes in the powers of public authorities, demonstration projects, or public education programs.
Efforts to increase public acceptance may also be needed to prepare for regulatory and pricing regimes implied by the strategy. Aside from opposition to policies that will raise energy and goods prices, there also is resistance among customers to changes in price structure. For instance, most strategy studies imagine an electric system supplied almost 100 percent by intermittent renewables—a development that likely will need to depend to some degree on demand-side flexibility as well as on some form of storage. There is a history of customer opposition to the time-of-day pricing that would facilitate that change in electricity markets. Future barriers like this can be highlighted by strategy studies, suggesting that preparation for this change should start now (as is being done in California) with experiments, information campaigns, and targeted technology programs.
A third example is the desirability of beginning preparations to deal with the problem of stranded assets, to mediate the opposition of those threatened by the change to a low-carbon economy. For important segments of society, the transition to zero CO2 emissions will be highly disruptive, and its pace will be slowed if attention is lacking to activities that will ease the burden on those most affected. The problem is not primarily with the capital goods that normally come to mind, like high-emission power plants or the reserves in financial statements of oil companies. The risks to those assets are widely distributed through capital markets. The principle barriers to change come from entities that cannot diversify the risk, and so become “stranded”—towns, whole states and regions of a country, and workers with specialized human capital.
The problem is already evident in efforts to meet the first NDCs, for example in the squeezing of coal use in some countries. But this is only the beginning. Much larger disruption is to come in all fossil energy and in its supporting industries, communities, and regions of the nations that supply it. Moreover, similar effects are in store for the assets of heavy energy-using sectors, such as transportation. Strategy studies can identify where these problems will likely arise, and support work on measures to compensate the losers or otherwise lower the pain. Various mechanisms could be used—such as allocation of cap-and-trade permits or carbon tax revenues to affected regions and/or initiatives akin to the adjustment assistance programs used by some countries to ease the disruptive consequences of international trade agreements. Determining how this adaptation to likely pressures might be accomplished within specific economies, political systems, and cultures will take time, however, and early attention to these coming problems will enhance the credibility of the low-carbon strategy.
The list of long-term challenges that merit short-term attention will differ among nations, depending on the nature of the economy and its energy system, and the state of climate policy development. Whatever the context, however, just bringing these concerns into focus in a party’s strategic plan will be a useful step. An even greater contribution to the Paris objectives can be made if actions being taken to meet these concerns are noted in the various reports under the agreement. In a system of voluntary pledges like that established in Paris, free riding is always a threat, and “name and shame” is about the regime’s only enforcement mechanism. The agreement gives great attention to this aspect in its transparency framework, to provide “clarity, transparency and understanding” of pledged NDCs and progress to meet them. Information from strategy studies about nations’ current preparations for the long-term challenge will support this crucial feature of the agreement.
The information needed to identify needed actions, like the examples above, is buried in existing strategy submissions and can be drawn out in supplementary studies. Strategy efforts still in preparation, or revised versions of those already submitted, can be anchored in near-term effort by including in their design the desire to flag the main barriers anticipated in the long run transition, highlighting a few for which preparatory effort is being undertaken in the near term. By such integration of the agreement’s components, nations will gain greater advantage of the effort put into their long-term studies. It would give them an action orientation and demonstrate that long-term challenges are recognized and beginning to be addressed. In this way, the strategy effort can help build confidence during this critical launch stage of the new regime.
1 United Nations Climate Change, “Communication of Long-Term Strategies,” 2018, https://unfccc.int/process/the-paris-agreement/long-term-strategies.