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2. The Persistent Consequences of the Energy Transition in Appalachia’s Coal Country
- Author:
- Eleanor Krause
- Publication Date:
- 03-2023
- Content Type:
- Policy Brief
- Institution:
- Belfer Center for Science and International Affairs, Harvard University
- Abstract:
- The persistence and intensification of earnings, employment, and opportunity gaps across place has become an increasingly salient feature of the United States economy over the past several decades.1 This economic divergence has occurred alongside a remarkable transition away from coal-fired electricity that is expected to continue as lower-carbon energy sources become more economically viable. While essential to minimizing the damages of climate change, the shift poses significant challenges to the relatively rural and distressed communities traditionally reliant on this resource. Indeed, many historically coal-dependent communities in Central Appalachia have long been characterized by deep poverty, limited employment opportunities, and high rates of public assistance, and recurrent adverse shocks to coal employment over the past several decades have amplified many of these qualities, potentially elevating the risks associated with the energy and economic shifts ahead. How have Appalachia’s coal-dependent communities adjusted to historical and contemporary declines in demand for coal, and how do these shocks – and their consequences for the educational composition of affected communities – influence the capacity for future generations to adapt to new challenges? In this policy brief, I present estimates of how Appalachia’s coal country has adjusted to recent declines in coal mining employment (“coal shocks”), and I demonstrate how this adjustment process is, in part, dictated by the persistent consequences of historical employment shocks in Appalachia. The evidence suggests that recent coal shocks (i.e., declines in coal employment occurring between 2007 and 2017) have been relatively painful for affected communities, causing large reductions in local population sizes, declines in local employment counts, declines in earnings, and increases in the rate of government transfer receipt. All of these adjustment costs are more severe in counties with a history of “selective migration” induced by shifting employment opportunities in the 1980s. That is, the estimated effect of recent coal shocks on population sizes, employment, earnings, and transfer payments is significantly larger in counties that lost greater numbers of their college-educated adults in the 1980s thanks to historical employment shocks in proximate labor markets. The upshot is that coal-dependent communities may demonstrate little resilience to recent coal shocks in part because of the persistent consequences of historical shocks, which fundamentally altered the educational composition of affected communities. By dramatically reducing the number of college-educated individuals living in a community, adverse shocks have the capacity to put places on a pathway of decline that makes it more difficult to adapt to economic shifts in subsequent generations. These insights preview the potentially damaging implications of future contractions in the coal industry, revealing the need for greater empirical investigation of the types of policy efforts that might ameliorate the painful local adjustment costs associated with the energy transition going forward.
- Topic:
- Climate Change, Employment, Coal, and Energy Transition
- Political Geography:
- North America, United States of America, and Appalachia
3. Updating Estimates of Methane Emissions: The Case of China
- Author:
- Zichong Chen and Daniel Jacob
- Publication Date:
- 05-2023
- Content Type:
- Policy Brief
- Institution:
- Belfer Center for Science and International Affairs, Harvard University
- Abstract:
- The Harvard Initiative to Reduce Global Methane Emissions released its first publication in May 2023: a research brief titled “Updating Estimates of Methane Emissions: The Case of China.” The Initiative is one of five interdisciplinary research clusters funded by the Salata Institute for Climate and Sustainability at Harvard University. The Harvard Project on Climate Agreements collaborates in the implementation of the Initiative. The brief summarizes research by Professor Daniel Jacob and postdoctoral fellow Zichong Chen, atmospheric scientists at Harvard University, with their colleagues. Jacob and Chen use high-resolution data from the TROPOspheric Monitoring Instrument (TROPOMI), onboard a satellite launched in 2017, to estimate national and sectoral methane emissions more accurately than has been possible in the past. They draw upon atmospheric transport models to invert the satellite observations of methane concentrations, using advanced statistical methods, and infer emissions quantities and locations from the observed atmospheric concentrations. This method has yielded generally higher estimates of emissions than in previous reports, including in the case of China. Future methane-initiative briefs will address similar research the authors and their colleagues are conducting in the United States, Latin America, North Africa, and other countries and regions. An accurate picture of aggregate and sector-level methane emissions is important to better target mitigation policies. It is hoped that the results of the research described here and in subsequent briefs will advance national efforts and international collaboration aimed at reducing methane emissions. The Harvard Initiative to Reduce Global Methane Emissions seeks meaningful and sustained progress in global methane-emissions reductions through research and effective engagement with policymakers in government and key stakeholders in business, nongovernmental organizations, and international institutions. Reduced methane emissions can significantly reduce, in the near term, the magnitude of climate change and its associated impacts. The Initiative’s objectives span the full range of disciplines and topics associated with this challenge. Among its objectives are to build on scientific research on measurement and attribution of emissions; understand legal, regulatory, and political opportunities and constraints to methane-emissions reductions in the United States; design policies that might best contribute to methane emissions reduction; work effectively through existing international venues, such as the United Nations Framework Convention on Climate Change; and define roles that business and international and multilateral organizations can play in this effort.
- Topic:
- Climate Change, Methane, and Carbon Emissions
- Political Geography:
- China and Asia
4. The Science of Rapid Climate Change in Alaska and the Arctic: Sea Ice, Land Ice, and Sea Level
- Author:
- John P. Holdren
- Publication Date:
- 08-2023
- Content Type:
- Policy Brief
- Institution:
- Belfer Center for Science and International Affairs, Harvard University
- Abstract:
- The Earth’s surface north of the Arctic Circle, which includes nearly a third of Alaska, is warming 3-4 times faster than the global average.1 Alaska as a whole is warming twice as fast as the lower 48 states.2 As is true for most of the manifestations of anthropogenic climate change, moreover, the extremes of temperature are growing faster than the averages: the highest-ever temperature north of the Arctic Circle—100.4°F—was recorded in Verkhoyansk, Siberia, in June 2020;3 Anchorage reached an all-time high of 90°F on July 4, 2019;4 and Utqiavgik, Alaska, the northernmost U.S. city, reached an all-time winter high of 40°F in December 2022.5 The reasons warming is so fast in the Far North are quite well understood scientifically. The most important factor is the ice-snow-albedo feedback, in which warming reduces the area of land and water covered by ice and snow, which means less reflectivity and more absorption of incident solar energy at the surface, hence further warming.
- Topic:
- Climate Change, Environment, Carbon Emissions, and Sea Ice
- Political Geography:
- North America, Alaska, Arctic, and United States of America
5. Opportunities for Multilateral Cooperation on Climate Change in the Arctic
- Author:
- Jennifer Spence
- Publication Date:
- 08-2023
- Content Type:
- Policy Brief
- Institution:
- Belfer Center for Science and International Affairs, Harvard University
- Abstract:
- Climate change is complex, multi-dimensional, and far-reaching. The impacts of climate change are not uniform, however, and few regions are currently facing the rapid and dramatic effects being experienced in the Arctic. Being a region on the frontlines of climate change with sparse populations and limited infrastructure emphasizes the importance of leveraging opportunities for collaboration and coordination. The functions of multilateral cooperation in the Arctic related to climate change are multifold, including to: Deepen and accelerate understanding, Share experiences and lessons learned, Mobilize limited resources, Coordinate responses, and Collaborate on solutions.
- Topic:
- Climate Change, International Cooperation, and Multilateralism
- Political Geography:
- Arctic
6. Climate change actions in conflict affected contexts
- Author:
- Helene Maria Kyed and Justine Chambers
- Publication Date:
- 03-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- Violent conflict and state oppression in Myanmar demonstrates the importance of placing conflict analysis and people-centred approaches at the centre of international programming on climate change and environmental protection. In 2021, the United Nation’s Intergovernmental Panel on Climate Change (IPCC) warned that the impacts of the climate crisis will be particularly pronounced in poor and conflict-affected countries. Research also identifies climate change as a ‘threat multiplier’ that, in combination with socio-political factors like poverty, state incapacity and inequality, can intensify violent conflict. However, gaps remain in how to address the increase in climate change vulnerabilities in contexts with violent conflict and state oppression. This is evident in Myanmar, where a historically repressive military regime is threatening to cause longer-term ‘climate collapse’. Since a military coup in February 2021, extractive activities and war economies are destroying the natural environment and placing communities at further risk of displacement, violent persecution and food shortages. These effects of conflict are reducing local people’s capacity to adapt to climate change and threatening civil society’s efforts to protect the environment. Under such conditions, climate change programming needs to place conflict analysis at its centre stage and substitute state-centric and purely technical approaches with people-centred ones, in alignment with the localisation of aid agenda.
- Topic:
- Climate Change, Democratization, Environment, Natural Resources, and Peacebuilding
- Political Geography:
- Southeast Asia and Myanmar
7. What needs to change for green funds to be truly green
- Author:
- Jan Fichtner, Robin Jaspert, and Johannes Petry
- Publication Date:
- 03-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- Green investment funds are growing rapidly. However, their impact on climate change mitigation and sustainability remains unclear. Recent research has identified key shortcomings that need to be addressed in order to reduce greenwashing and make these funds truly green. Green finance is playing an ever more prominent role in recent years. Environmental, social and governance (ESG) funds, which constitute a key pillar of green finance, saw record inflows of hundreds of billions of US-dollars in recent years, primarily by retail investors. Essentially, these ‘green’ funds are integrating environmental, social and governance criteria, such as greenhouse gas emissions, labour rights and gender diversity into their investment strategy. They claim to invest less in the stocks of firms that are highly polluting or have bad governance practices, and instead buy the shares of corporations that appear to be more sustainable. In industry and policy debates, ESG funds are often cited as advancing the promotion of sustainability and helping to address climate change. However, the ESG concept, its underlying criteria, and its potential effects are highly controversial. Many critics see ESG primarily as ‘window dressing’, with no significant positive impact – either for the environment or for investors and employees.
- Topic:
- Climate Change, Environment, Oil, Gas, Capitalism, Sustainability, and Minerals
- Political Geography:
- Global Focus
8. Climate resilience and Cook Islands' relationship of Free Association with Aotearoa / New Zealand
- Author:
- David J. Kilcullen
- Publication Date:
- 05-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- On 1 January 2020, the Cook Islands was removed from the OECD Development Assistance Committee’s List of Official Development Assistance (ODA) Recipients. Having been assessed as a “high-income status country”, this re-classification rendered the Cook Islands ineligible for OECD development assistance. It was unfortunate timing. The Covid-19 pandemic hit a few months later and caused a significant contraction in the tourism sector on which the Cook Islands is economically dependent. The result was, by the government’s own description, a “severe recession” with a total contraction of -21.6% of GDP in 2020/ 2021. Thus, only months after being recognized as having a sufficiently high income as to no longer warrant OECD development-assistance, the Cook Islands lost nearly a quarter of its GDP. This was especially significant for a country that is particularly susceptible to climate change and weather-related hazards. The Cook Islands is made up of 15 coral atolls and volcanic islands. Over 90% of the residents of the 12 inhabited islands live within one kilometer of a coastline. In addition, its already modest population of just under 15,000 people is rapidly decreasing (down from approximately 17,500 in 2016), undermining social and economic resilience to shocks. Despite notable economic growth in the years preceding Covid-19, greater infrastructure and other investment remains essential to brace the country for future climate-related changes. A question thus arises as to the benefits of Free Association in circumstances where the former colony faces crises.
- Topic:
- Foreign Policy, Climate Change, History, and Resilience
- Political Geography:
- Europe, Denmark, New Zealand, and Cook Islands
9. Climate change, mobility and human trafficking in Ethiopia
- Author:
- Ninna Nyberg Sørensen
- Publication Date:
- 05-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- Throughout history, demographic, economic, political, religious, and environmental developments have resulted in Ethiopian mobility, mainly within the country or neighbouring region, but also further afield. Although Ethiopia’s current migration rate is only about half of the sub-Saharan average of 2%, the combined effects of poverty, population growth, conflict, and climate change have led to a recent growth in international migration. Women make up half of these flows. Proximity to the Middle East has facilitated women’s migration for domestic work while simultaneously raised concern over human trafficking violations. International Human Rights and anti-trafficking organisations predict that the negative effects of climate change will increase the vulnerability to trafficking in persons, forced labour, sexual exploitation, and debt bondage. This policy brief draws on research carried out under the auspices of the collaborative ‘Governing Climate Migration’ (GCM) research programme to further explore how climate change, migration and human trafficking may interlink. It questions routine applications of the human trafficking label to irregular Ethiopian migrant domestic workers and suggests replacing it with a migration-trafficking continuum approach that takes life before, during and after migration into account.
- Topic:
- Climate Change, Development, Migration, Borders, Risk, and Human Trafficking
- Political Geography:
- Africa and Ethiopia
10. Why adaptation projects do not stop climate-related migration
- Author:
- Lily Salloum Lindegaard, Nauja Kleist, Francis Jarawura, and Joseph Teye
- Publication Date:
- 06-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- Climate change constitutes a critical challenge for subsistence rain-fed agriculture in the Global South. Increasing temperatures, irregular rainfall, and dry spells have negative, sometimes devastating, consequences for rural communities. Harvest yields diminish or fail, the planting season becomes unpredictable, and the dry season may be prolonged. While subsistence farming has always been demanding in such areas, climate change amplifies these challenges. As a result, local communities draw on a range of alternative farming methods and livelihood strategies, ranging from employing different crops to seasonal or long-term migration. Migration as an adaptation strategy, however, is widely rejected by international donors, national governments and sometimes local authorities. Rather, these actors often aim to enhance and promote local agriculture or other locally based livelihoods through in-situ adaptation projects, or adapting in place. This can be through providing (or selling) inputs to increase yields, e.g. drought resistant seeds, fertilizers or pest control; promoting new farming techniques, e.g. climate smart or conservation agriculture; or improving access to key resources, for instance water access through irrigation. Affected communities are supposed to stay where they are – in other words, deal with the challenges on the ground.
- Topic:
- Climate Change, Environment, Migration, Natural Resources, and Adaptation
- Political Geography:
- Global Focus and Global South
11. How to encourage private sector climate initiatives in Kenya
- Author:
- Judith Mulwa and Marie Ladekjær Gravesen
- Publication Date:
- 07-2023
- Content Type:
- Policy Brief
- Institution:
- Danish Institute for International Studies (DIIS)
- Abstract:
- Climate change is a particularly pertinent issue in Kenya because the country’s economy is highly dependent on its natural resource base (such as agriculture and fisheries), which are sensitive to temperature and rainfall variabilities. As a party to the United Nations Framework Convention on Climate Change (UNFCCC), Kenya must work to mitigate and adapt to climate change. This requires significant financial resources. Per the UNFCCC framework, some national climate actions are not expected to receive financing from international financial sources. Therefore, the country must look for innovative ways of domestically sourcing finances for low-carbon development and climate resilience programmes. Kenya has, in this regard, set up and implemented a national climate fund for financing adaptation and mitigation projects, ideally from various sources, including the private sector. This policy brief explores the legal, price-based, property-based, and information-based incentives for private sector investment and engagement in climate adaptation and mitigation in Kenya. The analysis is based on desk research and 51 stakeholder interviews from identified private sector institutions and industries in Kenya.
- Topic:
- Climate Change, Environment, Natural Resources, Investment, and Private Sector
- Political Geography:
- Kenya and Africa
12. Getting global development back on track: Focus and start at home
- Author:
- Erwin van Veen
- Publication Date:
- 02-2023
- Content Type:
- Policy Brief
- Institution:
- Clingendael Netherlands Institute of International Relations
- Abstract:
- Since 2019, realisation of the Sustainable Development Goals (SDGs) has gone from patchy to off-track as a result of Covid-19, global price shocks caused by the war in Ukraine and accelerating climate change. About 100 million people were thrown back into extreme poverty and hundreds of millions more face reduced health, livelihood and income prospects for the rest of their lives. The climate change agenda also took a backseat. Long-term global effects will be profound in terms of growing migration flows, further climate degradation and, likely, more conflict, authoritarianism and populism. Putting global development back on track requires focusing on fewer priorities rather than the entire SDG agenda, namely those with the highest negative impact on developing countries: conflict, climate change and inequality. Addressing these problems primarily requires middle- and high-income countries to reduce their contribution to climate deterioration and inequality at home, and to increase their support for conflict resolution efforts elsewhere at a faster rate. While it may seem counterintuitive, the greatest development contributions that developed countries can make lie at home.
- Topic:
- Climate Change, Development, and Sustainable Development Goals
- Political Geography:
- Global Focus
13. Into the Blue Pacific: Why the EU Should Help Island Nations Address Climate Change and Maritime Insecurity
- Author:
- Elisabeth Suh and Hanna Gers
- Publication Date:
- 02-2023
- Content Type:
- Policy Brief
- Institution:
- German Council on Foreign Relations (DGAP)
- Abstract:
- The ‘Blue Pacific’ is a vast region in the South Pacific, encompassing 30 million square kilometers, three million inhabitants and 14 nations. Its consists of thousands of islands threatened by climate change – a concern aggravated by geopolitical competition. The EU can help mitigate these challenges through capacity-building for climate adaptation and maritime security and regional consolidation. This overlaps with European strategic interests, including establishing itself as a trusted outside power.
- Topic:
- Security, Foreign Policy, Climate Change, European Union, and Strategic Interests
- Political Geography:
- Europe and Pacific Islands
14. Migration in the Context of Climate Foreign Policy
- Author:
- Kira Vinke, Hannes Einsporn, Dana Schirwon, and Mahalia Thomas
- Publication Date:
- 04-2023
- Content Type:
- Policy Brief
- Institution:
- German Council on Foreign Relations (DGAP)
- Abstract:
- Migration, displacement and resettlement in the context of climate change are not distant scenarios of the future, but are now materializing along increasingly severe extreme events and slow-onset degradation. In view of accelerating global warming and the danger of crossing tipping points in the Earth system, forward-looking climate foreign policy and development policy should increasingly focus on severe climate impacts.
- Topic:
- Foreign Policy, Climate Change, Development, and Migration
- Political Geography:
- Germany and Global Focus
15. Non-economic loss and damage: closing the knowledge gap
- Author:
- International Centre for Climate Change and Development (ICCCAD)
- Publication Date:
- 01-2023
- Content Type:
- Policy Brief
- Institution:
- International Centre for Climate Change and Development (ICCCAD)
- Abstract:
- Climate-related loss and damage is escalating, with many countries experiencing new forms of climate impact, of increasing intensity. The focus until now has been on calculating the economic repercussions of climate risk. Its wider impacts and resulting hidden costs of climate change — such as loss of cultural heritage — are less understood and harder to quantify. This knowledge gap on non-economic loss and damage, which is largely due to limited coordination around research and sparse evidence originating from the global South, urgently needs addressing. This briefing proposes a comprehensive approach for building the evidence base on non-economic loss and damage, particularly the creation of a Loss and Damage Research Observatory. This online platform will lay the foundations for a collaborative South–South–North community of practitioners, ultimately leading to informed policy on this critical area of climate action.
- Topic:
- Climate Change, Health, Displacement, Conservation, Indigenous, Resilience, and Biodiversity
- Political Geography:
- Global Focus
16. Scaling up locally led adaptation in Bangladesh: three action areas
- Author:
- International Centre for Climate Change and Development (ICCCAD)
- Publication Date:
- 05-2023
- Content Type:
- Policy Brief
- Institution:
- International Centre for Climate Change and Development (ICCCAD)
- Abstract:
- Although highly climate vulnerable, Bangladesh in South Asia is known as a pioneer of climate change adaptation. Recent national policies have recognised the vital importance of community-based and locally led adaptation (LLA). Where LLA interventions have been used by international and national nongovernmental organisations (NGOs), they have proven to be both effective and widely accepted by local communities. Yet major gaps remain in implementing LLA nationally due to legislative, administrative and conceptual limitations. Meeting Bangladesh’s ambitious national targets will require better coordination within government and with NGOs, so that each can benefit from the other. Building on recent examples, this briefing showcases existing interventions that are replicable and scalable and presents three key action areas requiring further government support. The lessons are also relevant to LLA practitioners in Bangladesh and other Least Developed Countries.
- Topic:
- Climate Change, Development, Local, Community, Adaptation, and Capacity Building
- Political Geography:
- Bangladesh and South Asia
17. Climate Change Mitigation for Late Industrialisers: The Role of Technology Intensity in Manufacturing
- Author:
- Elvis Korku Avenyo and Fiona Tregenna
- Publication Date:
- 02-2023
- Content Type:
- Policy Brief
- Institution:
- Centre for Business and Development Studies (CBDS), Copenhagen Business School
- Abstract:
- Many developing countries now have a renewed focus on industrialisation and industrial policy. This is based on the recognition that industrialisation is a key driver of long-term economic progress and is the central route to improve the well-being of citizens in developing countries (Chenery, 1955; Tregenna, 2016; United Nations Industrial Development Organization [UNIDO], 2016). At the same time, the climate crisis poses an existential threat to the global economy and to humanity and has emerged as a challenge to the industrial development prospects and pathways of developing countries. This is because industrialisation is an important contributor to global warming, specifically to anthropogenic emissions of cardon dioxide (CO2.) (Adom et al., 2012; Han & Chatterjee, 1997). Late industrialisers thus face a dual challenge: industrialising while mitigating climate change (Altenburg & Rodrik, 2017). Hence, there is now a degree of tension as to how late industrialisers can achieve long-term economic development under paths involving heavy or intensive industrialisation, while mitigating emissions and environmental damage more broadly. An emerging discourse recognises the critical need for developing countries to push towards industrial development that, while generating growth in productivity and jobs, is also environmentally sustainable. This is especially important, as poorer countries are particularly vulnerable to the immediate effects of the climate crisis (Altenburg & Rodrik, 2017; Padilla, 2017). Thus, transforming towards sustainable production systems and green industrial policies offers developing countries opportunities to industrialise in an environmentally sustainable way while contributing to job creation and economic prosperity (Altenburg & Rodrik, 2017; Padilla, 2017; Rodrik, 2014). However, the high ‘green premia’ and new access barriers to the ‘green’ energy technologies from advanced economies directly threaten this potential sustainable industrial development pathway in developing countries.
- Topic:
- Climate Change, Development, Science and Technology, Manufacturing, Industrialization, Sustainability, and Carbon Emissions
- Political Geography:
- Global Focus
18. Financing Loss and Damage at Scale: Toward a Mosaic Approach
- Author:
- Michael Franczak
- Publication Date:
- 05-2023
- Content Type:
- Policy Brief
- Institution:
- International Peace Institute
- Abstract:
- The historic decision on loss and damage (L&D) at the 2022 UN Climate Change Conference (COP27) calls for a new fund and funding arrangements focused on addressing L&D. It also tasks a Transitional Committee to prepare recommendations on the new fund and funding arrangements for adoption at the 2023 UN Climate Change Conference (COP28) in Dubai. This decision reflects a recognition that existing funding arrangements are grossly inadequate to address the escalating scale of L&D. Addressing L&D will require both enhancing these existing arrangements and creating a new fund and funding arrangements, forming a mosaic of solutions across countries, institutions, and markets. This paper aims to aid the Transitional Committee and other stakeholders by providing an initial sketch of that mosaic. First, it examines existing arrangements, modalities, and sources of funding for addressing L&D from UN humanitarian agencies, multilateral development banks and international financial institutions, and insurance and bond markets. Second, it proposes reforms to existing arrangements that would address key finance gaps and bottlenecks. Third, it identifies elements of a new L&D fund that would complement existing arrangements and make use of innovative finance (including levies and bond issuances) to operate at scale. With roughly six months left until COP28, the Transitional Committee will need to work efficiently to achieve its mandate, which includes determining the fund’s institutional arrangements, modalities, structure, governance, sources of funding, and coordination and complementarity with existing funding arrangements. To this end, the paper recommends that it should: Begin securing financing before COP28, particularly innovative financing, which takes longer to secure than traditional donor contributions; Consult with the private sector to determine its role, including in the use of insurance mechanisms and risk pools, frontloading, and connections between L&D and jobs; Determine the form and role of triggers, including for slow-onset events; Consider how to address noneconomic losses, including displacement and forced migration; and Identify the actions, mechanisms, and institutions required to operationalize the fund, including an internal or external coordination mechanism.
- Topic:
- Climate Change, Development, United Nations, and Finance
- Political Geography:
- Global Focus
19. The potential of sovereign sustainability-linked bonds in the drive for net-zero
- Author:
- Alexander Lehmann and Catarina Martins
- Publication Date:
- 03-2023
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- European Union governments have for some years issued green bonds that raise funds for climate-related spending. These bonds have been received well in capital markets but because they promise a certain use of proceeds, they complicate budget management and may not match investors’ claims of having an impact on national climate policies. Public commitments made by major investors and asset owners suggest that limiting climate transition risks and the assessment of the alignment of sovereigns with net-zero targets will now become key determinants of portfolio allocation. Yield differentials in bond markets are already beginning to reflect transition risks that arise from the inadequate pursuit by issuers of climate targets. Unlike standard green bonds, sustainability-linked bonds (SLBs) create a link between performance (outcome) indicators and the financial terms of the bonds. SLBs have grown rapidly in importance in private markets and are now being assessed by sovereign issuers. We show that sovereign SLBs could help incentivise climate policies in EU countries, and accelerate emission reductions. They would be an effective tool for signalling commitment. A common EU framework for issuance by EU countries would enhance capital market integration and the transparency of national policies, and would limit climate transition risks in EU capital markets more broadly.
- Topic:
- Climate Change, European Union, Finance, Carbon Emissions, and Sovereign Bonds
- Political Geography:
- Europe
20. Climate versus trade? Reconciling international subsidy rules with industrial decarbonisation
- Author:
- David Kleimann
- Publication Date:
- 02-2023
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- The vast environmental subsidies that may be required for the transition to net-zero greenhouse gas emissions are starting to generate international trade and political frictions between the world’s largest economies. This puts (supra-)national industrial decarbonisation efforts on a collision course with international subsidies rules and national countervailing duty (ie anti-foreign subsidy) laws and regulations. International cooperation will be essential to defuse such tensions before they escalate and impede effective climate policy rollouts, and before they lead to economic countermeasures that create new barriers to trade in environmental goods. This requires agreement on permissible environmental subsidy practices that minimise distortions. Meanwhile, it will be crucial to provide financial transfers to assist poorer economies with industrial decarbonisation at the same time as those poorer economies are suffering from the cross-border negative economic impacts of otherwise net-global-welfare enhancing environmental subsidies paid out by wealthy countries. Various forums can host the technical and political negotiations necessary to set the parameters of net global-welfare enhancing subsidies. These include the G7, the G20, the Organisation for Economic Co-operation and Development, the World Trade Organisation’s Trade and Environment Committee and WTO Trade and Environmental Sustainability Structured Discussions, and the Coalition of Trade Ministers on Climate.
- Topic:
- Climate Change, Political Economy, Trade, Carbon Emissions, Subsidies, and Decarbonization
- Political Geography:
- Global Focus