Why We Can (Or Can't) Decarbonise The Economy

Research essay written for the subject Political Economy.

Introduction

Climate change represents an existential threat to social and economic livelihoods on a global scale.  This essay will argue that distributional conflicts over resources affected by climate change most persistently characterise political obstacles to decarbonisation. In particular, as a result of the unequal distribution of the costs and benefits of decarbonisation. This essay will first address how the diverse nature of climate change on differing countries limits the scope of its analysis.  Secondly, it will examine two contending theories behind the politics of climate mitigation: the collective action theory and the distributive conflict theory. An exposition of the collective action theory, and its flaws, will contextualise distribution theory as the most appropriate account of climate politics. It is from this theoretical understanding that specific political obstacles to rapid decarbonisation emerge. These obstacles will be examined with reference to numerous countries, including the US, China, and EU. In particular, domestic and global inequality of benefits and losses, the negative salience of climate policy, and threats to global trade stability. Whilst latter two can be limited depending on temporal and geographical constraints, the first obstacle applies most universally. 

Climate change is a challenge of relatively unprecedented scale, interdependency, and difficulty, which obstructs the realisation of one simple pathway to decarbonisation. In particular, the best policy responses are contingent on the relevant geographical locus of concern; strategies for decarbonisation in Northern Europe are unlikely to be suitable for South-East Asia. Concurrently, political obstacles to rapid decarbonisation will undoubtedly vary depending on country. Therefore, this essay is limited to examining what are commonly the most significant political obstacles to rapid decarbonisation. Though they may vary in significance depending on the country of focus, the theories and obstacles chosen will have overarching relevance to the majority of, though not all, countries. 

Collective action theory

Literature on the politics of climate change, in particular its mitigation, has been largely divided into two opposing discourses which provide distinct accounts of how climate policy is determined: the collective action theory and the distributive conflict theory. 

Collective action has largely been the dominant paradigm of climate policy determination (Aklin & Mildenberger 2020, 5). This theory is predicated on the categorisation of decarbonisation’s benefits as common pool resources (CPR) and public goods. CPR are non-excludable but rivalrous, meaning no actor can be excluded from their use, but their use will result in their depletion. Examples include clean air, clean water systems, and forests. Public goods are both non-excludable and non-rivalrous, including institutions and R&D for climate technologies (Keohane & Victor 2010, 9-10). Crucially, both are non-excludable, meaning actors are motivated to free-ride on the benefits of their peers’ climate mitigation (Aklin & Mildenberger 2020, 5). Therefore, the collective action theory expects major economies to unsustainably exploit global commons in the absence of strong global institutions to monitor international cooperation (Aklin & Mildenberger 2020, 7). A lack of effective international institutions, and therefore disinterested national climate agendas, will create a fragmented and ultimately insufficient global effort towards decarbonisation. Hence, significant efforts towards climate multilateralism, including the 1992 Rio Summit, 1997 Kyoto Protocol, and 2015 Paris Agreement, have emphasised international free-riding as the key political barrier to climate mitigation (Aklin & Mildenberger 2020, 5).

Distributive conflict theory

However, Aklin and Mildenberger, and Colgan et al., convincingly argue distributive conflict provides the most rigorous account of how climate policy is determined. Both concur that there is insufficient evidence to suggest the collective action problem has materially impacted countries’ policy decisions. This is true for two reasons. Firstly, there is little evidence that countries reciprocally adopt climate policy. For example, despite the United States’ (US) climate intransigence through the 1990s-2000s, the European Union (EU) unilaterally bolstered climate mitigation policies, including the notable Emissions Trading Scheme (Aklin & Mildenberger 2020, 12-13). Secondly, studies indicate that national publics are largely insensitive to the climate agendas of other countries and are not significantly affected by free-riding concerns (Aklin & Mildenberger 2020, 14-16). Even if collective action has a limited effect, this is easily critiqued by its observational equivalence to other competing theories (Aklin & Mildenberger 2020, 5).

Instead, distributive theory observes that the redistribution of resources which are affected by decarbonisation determines a country’s climate stance. Ideal decarbonisation requires the absolute renegotiation of social and economic institutions and infrastructures. This dramatic upheaval necessitates winners and losers, triggering material distributive conflict between groups, further compounded by ideological dissidence. Colgan et al. concentrate on asset revaluation, whereby individual actors’ interests, power, and impetus change with the valuation of their assets (Colgan et al. 2021, 592). They identify two kinds of assets: climate-forcing assets (CFAs, e.g., oil fields, beef farms) and climate-vulnerable assets (CVAs, e.g., coastal property, fisheries). Asset holders exist on a spectrum between pure ownership of either (Colgan et al. 2021, 593-94). Under decarbonisation, CFAs will depreciate whilst CVAs appreciate, thereby altering the political favourability of actors towards decarbonisation. In this way, the distribution of climate-affected assets heavily influences subnational and national policy, and therefore international cooperation. 

Unequal benefits and losses

The unequal distribution of the energy transition’s social and economic burdens, particularly towards marginalised communities and developing economies, is a significant political obstacle to achieving a ‘just’ energy transition.

Domestic

On a domestic level, carbon-mitigation policies overburden poorer households and people of colour (Colgan & Hinthorn 2023, 84). Firstly, despite its progressive goal of internalising negative externalities of carbon consumption, carbon pricing is inherently regressive (Swanson 2023). Lower-income households, who exhibit lower levels of fossil fuel consumption, will front a larger proportion of their household income for carbon taxes and permits than their high-income counterparts (Holmberg 2017, 19). Furthermore, low-income groups face higher barriers to alternative technologies. Particularly in the US, existing stimuli for renewable initiatives, like the Solar Investment Tax Credit, are biased towards higher-income groups (Holmberg 2017, 20). Therefore, the ability of groups to avoid increasing fossil fuel costs is unequally distributed. This effect is compounded for people of colour, since the cost burden of energy is correlated with race, even when controlling for income (Colgan & Hinthorn 2023, 84). Finally, the renegotiation of the labour force towards renewable energy will inordinately impact marginalised workers. Again in the US, a significantly larger percentage of African Americans and Latinos live within 30 miles of a coal-fired power plant (Holmberg 2017, 20). This suggests both greater reliance on CFA industry, and increased vulnerability to job loss. Whilst the energy transition protects climate stability, it does not guarantee energy equality or justice. Therefore, achieving a ‘just transition’ for electorally significant low-income groups is a key political obstacle for decarbonisation. 

Global

Globally, decarbonisation unequally disadvantages developing countries. Greenstone (2024) highlights the ‘cruelty of climate arithmetic’, whereby developing countries are expected to limit energy consumption most despite high need and low willingness to pay (Greenstone 2024, 3). ‘Emerging’ countries are expected to comprise 130 percent of growth in energy demand from 2025-2050 (Greenstone 2024, 6). To achieve climate targets, it is therefore necessary for developing economies to make more significant emissions reductions. However, their marginal utility of consumption for CFAs is relatively higher, since increased energy consumption is integral to economic development and improved living standards. For example, an extremely hot day in India is approximately ten times more deadly than in the US, due to limited access to energy for cooling (Greenstone 2024, 17). Income growth is needed to improve access to heating and cooling, transportation, and more, which mandates increasing energy consumption to further economic development. Thus, the trade-off between improved living standards and decarbonisation contributes to low willingness to pay in developing economies, a crucial obstacle to decarbonisation. Furthermore, today’s wealthy economies have already benefited from industrialisation built on fossil fuels, which have largely caused the historical emissions which catalysed our present climate crisis (Greenstone 2024, 16). Therefore, it can be argued a form of ‘climate imperialism’ for developed countries to demand the decarbonisation of developing ones (Greenstone 2024, 5). Hence, politicians face the normative challenge of justifying why developing economies must bear the brunt of fallout from the global energy transition.  Therefore, the necessary decarbonisation of developing economies is politically problematic both to achieve and to demand. 

Negative salience of decarbonisation policy

The disparate distribution of the costs and benefits of climate change give climate policies significant negative public salience, which is another political challenge to incentivising rapid decarbonisation. Firstly, the positive externalities of developing renewable energy are widely and publicly distributed, for example global climate benefits and improvements in air quality and health (Breetz et al. 2018, 495). However, negative externalities are predominantly private, directly impacting individuals through carbon taxation, financial investments, and job losses. Furthermore, climate change is an intergenerational problem, such that its negative impacts will be most severely felt into the future.  In this way, politicians are challenged with convincing publics that the direct costs borne today are worth distant, somewhat intangible future benefits (Keohane & Victor 2010, 9). Despite understanding environmental goals, most voters are not willing to sacrifice energy consumption nor pay for mitigation measures (Colgan & Hinthorn 2023, 85). Therefore, the high degree of salience of decarbonisation’s costs to most voters, and the relatively lower salience of its benefits, create difficulties in justifying pro-climate policies. Notably, this obstacle is less significant in developing countries, where air quality and health disadvantages are generally worst such that benefits are felt more directly. For example, policy preferences between India’s general population and climate-vulnerable groups largely converge. Gaikwad et al. attribute this to a higher level of climate concern amongst non-vulnerable groups due to lower access to protective mechanisms in poorer countries (Gaikwad et al. 2022, 1172-73). Therefore, the significance of negative policy salience is limited depending on how impacted a country is by climate change.

Trade conflict

Finally, differing stances on decarbonisation cause geopolitical trade conflict and threaten the liberal international order (LIO). Some countries, predominantly those with a greater proportion of CVAs, have already taken drastic policy action towards decarbonisation.  Notable policy tools include the subsidisation of green industries, tax credits, and taxes and tariffs on carbon-intensive goods (Swanson 2023). Such states have a strong protectionist incentive to shield domestic producers against low-cost, carbon-intensive imports. However, there are a large number of CFA-reliant countries who continue to subsidise carbon-intensive industry. This disparity creates significant political tensions between countries with progressive and conservative climate policies, prompting deviation from trade liberalisation measures sanctioned by the LIO (Colgan et al. 2021, 602). For example, the introduction of tax credits for clean energy equipment and vehicles by the Biden administration has triggered trade conflict with the EU, Japan, and South Korea. In response, European officials considered their own green subsidies, tariffs on American imports. Therefore, trade disadvantages of a green economy incentivise protectionist trade policies, which inherently aggravate trade conflict. This is particularly significant given that decarbonisation cannot be achieved without collaboration between all global actors. However, it is possible that the weight of this obstacle will diminish in the long-run. Colgan and Hinthorn (2021) suggest that a short-term increase in international conflict will eventually be superseded by improved security and peace long-term. Gas and oil sectors involve geographically concentrated economic benefits, encouraging ‘petro-aggression’ (Colgan & Hinthorn 2023, 84). Should major economies successfully decarbonise, the broader distribution of renewable energy resources may help alleviate geopolitical tensions. However, I note that this benefit will only materialise once significant decarbonisation has already occurred, meaning its current significance is limited.

Conclusion

Ultimately, decarbonisation will involve the redistribution and revaluation of all resources in domestic and global energy economies. The existing variation in distribution of CFAs and CVAs within and between countries motivates the most significant political obstacles to achieving decarbonisation. These can be primarily attributed to the unequal distribution of the costs of decarbonisation and climate mitigation policies, which depends on a country’s level of development and climate progressiveness. In addition, the largely indirect benefits and direct costs of decarbonisation to general publics disincentivise pro-climate political sentiment. Therefore, political obstacles to rapid economic decarbonisation are distributional problems entrenched in international relations and socioeconomic inequality. 

Bibliography

Aklin, M. and Mildenberger, M. 2020. “Prisoners of the wrong dilemma: Why distributive conflict, not collective action, characterizes the politics of climate change.” Global Environmental Politics 20(4): 4-27.

Breetz, H., Mildenberger, M., and Stokes, L. 2018. “The political logics of energy transitions.” Business and Politics 20(4): 492-522.

Colgan, J., Green, J., & Hale, T. 2021. Asset Revaluation and the Existential Politics of Climate Change. International Organization, 75(2), 586-610.

Colgan, Jeff D. and Miriam Hinthorn. 2023. “International Energy Politics in an Age of Climate Change.” Annual Review of Political Science 2023, 26(1), 79-96.

Gaikwad, N., Genovese, F., & Tingley, D. 2022. “Creating Climate Coalitions: Mass Preferences for Compensating Vulnerability in the World’s Two Largest Democracies.” American Political Science Review, 116(4), 1165-1183.

Greenstone, Michael. 2024. "The Economics of the Global Energy Challenge." AEA Papers and Proceedings, 114: 1–30.

Holmberg, Susan. 2017. “Boiling Points: The Inextricable Links Between Inequality and Climate Change.” Roosevelt Institute.

Keohane, Robert O. & David G. Victor. 2010. “The Regime Complex for Climate Change.” Harvard Kennedy School of Government, Discussion Paper 10-33, January.

Swanson, Ana. 2023. “Climate Change May Usher in a New Era of Trade Wars.” The New York Times, January 25, 2023.