Barriers to the implementation of climate mitigation policies:

Lessons from the carbon tax decision-making process in France (2009-2010)

Draft version to download : Barriers to the implementation of climate mitigation policies-SustainableRIO – CaroleAnne Senit

Carole-Anne Sénit, IDDRI
caroleanne.senit@iddri.org

“To tax and to please, no more than to love and to be wise, is not given to men.”
Edmund Burke, Irish political philosopher (1729-1797)

Nowadays, sustainable development is primarily – though erroneously – associated with the issue of climate change. Since it erupted onto the international agenda at the beginning of the 1990s, climate change has gained considerable policy space. Yet, it has not always been the case. Climate disruptions were indeed mentioned in the first reports on the present and future state of the global environment but did not constitute an important feature of such works. For instance, Our Common Future (1987), also known as the Brundtland Report, mentioned on page 2 the “greenhouse effect” and considered it as a “threat to life support systems” but did not dedicate a specific chapter to global warming.
Rio’s Earth Summit in 1992, and more prominently the Kyoto Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 1997 have been crucial turning points. Today, the international community has clearly seized the climate issue, which has become a full political object. Why? First of all, the integration of climate change into public action answers to a policy demand from citizens, who believe that the responsibility into taking action to combat climate change lies first and foremost with public authorities, whether these may be international, national or regional. Public authorities have therefore progressively inserted the issue of global warming into their policy agenda as the awareness and concern of public opinion about such issue increased. Before 1997, while 68% of European citizens perceived air and water pollutions as the most important threats to the environment, only 42% of Europeans considered global issues such as climate change, deforestation or the ozone layer depletion as serious threats (Eurobarometer 47.0). In 2007 however, climate change was the first environmental issue most European citizens were worrying about. Secondly, as a new issue for public action, climate change has been the subject of an important and unprecedented mobilization from civil society, the media and high-level decision-makers. Indeed, the 15th Conference of Parties to the UNFCCC gathered from December 7th to 18th 2009 in Copenhagen more than 25.000 observers representing nearly 400 NGOs1, 4.000 journalists, 10.000 State delegations’ members as well as 110 heads of States. Since the Rio Summit, no global conference on sustainable development had succeeded in mobilizing so many decision-makers. Thirdly, the climate change public action issue has given rise to proactive speeches and ambitious political announcements from heads of States and governments. Being widely accepted within the scientific community that an increase of the average surface temperature beyond 2°C above pre-industrial levels would generate dangerous changes in the Earth climate systems, international and national authorities have seized this threshold and included it as a political goal into international statements and agreements (Communication of the European Commission Limiting global Climate Change to 2 degrees Celsius, 2007; Copenhagen Accord, 2009) as well as national climate strategies (French Climate Plan, 2006).
Yet, the integration of global warming into international and national policy agendas is not happening without any difficulty. Climate change, a unique issue among other environmental problems, challenges public action in many ways. As a result, despite the numerous iterations stemming from the scientific community, civil society, and decision-makers themselves about the urgency of an ambitious concerted political action, discourse and practice do not match. Actually, even if the pledges and intentions associated with the Copenhagen Accord (2009) were fully implemented, this would not prevent the global surface temperature from rising beyond the 2°C threshold. Similarly, the 36 annex-1 parties to the Kyoto Protocol that together pledged to cut carbon dioxide (CO2) emissions by 5% from 1990 levels by 2012 will comfortably exceed that target. While the European Union committed to cut its CO2 emissions by 8% from 1990 levels, the actual decrease only reaches 2.4%. More worrying is the situation of Canada: while accepting a pledge of 6% emissions reduction from 1990 levels, its CO2 emissions actually increased by 28% between 1990 and 2004 (UNFCCC). Evidently, decision-makers have failed to implement both international and domestic political frameworks and instruments capable of orienting our societies towards decarbonised development paths.

Therefore, how can we explain the gap between the urgent and drastic changes that would require the respect of the 2°C target and actual political sluggishness? In this paper, we argue that climate mitigation policies are more complex to conceive and implement than other public policies. Barriers are mainly of two different natures. The first section of this paper will focus on the intrinsic and unique properties of the climate issue that, when aggregated, delay decision-making. The second section of this paper will focalize on extrinsic obstacles: after analysing the influence of both political and economic contingencies on climate policies’ adoption and effective implementation, we will focus on macroeconomic expertise, which fails to diffuse properly to decision-makers while it could provide them with key arguments of acceptability. The arguments brought forward in this paper stem from literature and interviews of French high civil servants and representatives on the aborted carbon tax2 project (2009-2010).

1. Intrinsic factors: Specificities of the climate issue for public action.

In the 1970s and the 1980s, global emissions of CO2 from burning fossil fuels increased at a rate of 2% each year. In the 1990s they fell to 1%. And since the year 2000, the growth rate of the world’s CO2 emissions has almost trebled to 3% a year, which amounts to a doubling of annual emissions every 25 years. As a result, the concentration of CO2 in the atmosphere today is the highest it has been for the past 650,000 years. In order to avoid the devastating consequences that would imply a runaway climate change, emissions should peak within the next few years and, no later than 2020 begin a rapid decline until all generation and industrial processes become completely decarbonised. However, decision-makers do not seem to appreciate the gravity of the situation. Why?
Independently from the climate issue, every policy issue has to contend with rival polity themes for attention, compete for political capital and material resources, as decision-makers pursue many agendas simultaneously. Besides, designing and implementing policies to respond to any serious and urgent policy issue face a systemic inertia. Political institutions take time to respond to changed circumstances and it can take years for a policy to be implemented, even when it is consensual. Yet, we argue that climate change imposes its own logic to governmental action, as it does show some peculiarities – comparing to other traditional policy issues – that accentuate the inertia of policy and decision-making. The most important source of political and decisional inertia lay with the fact that climate change easily exceeds the time frame of human and political generations, often put at respectively 25 and 5 years. Climate change indeed shares all the characteristics defining a long-term policy issue, as it “last[s] at least one human generation, exhibit[s] deep uncertainty exacerbated by the depth of time, and engender[s] public goods aspects both at the stage of problem generation as well as at the response stage” (Sprinz, 2009).

1.1. Time inconsistencies

First, climate change is a long-term problem because (i) the mechanism creating it – the accumulation of greenhouse gases in the atmosphere – leads with a certain time lag to substantial adverse or even irreversible effects for at least a human generation; and (ii) the remedy – mitigation, adaptation and transition to a low carbon economy measures – would take an equally substantial amount of time (Sprinz, 2009).
Earth’s climate system has considerable thermal inertia: climate change is therefore a slow process, which consequences are delayed in time. Indeed, researchers argue that even if greenhouse gases never rise beyond their present level, temperatures and sea levels will continue rising for another century: this effect is known as the climate time lag. As a result, we have not yet seen the full rise in temperature that will occur consequently to the emissions we have already emitted: while the Earth’s average surface has already risen by 0.8°C since 1900, scientists show that temperatures would continue to rise between 0.4°C and 0.6°C over the next century if the concentration of CO2 in the atmosphere was to be stabilized at its current level of 390 parts per million (ppm). The reason the Earth’s surface temperature takes several decades to respond to increased CO2 is the thermal inertia of the oceans: because the mass of the oceans is around 500 times that of the atmosphere, it takes decades to warm. Evidence from Earth’s history and climate models suggest that 25 to 50 years are needed for the Earth’s surface temperature to reach 60% of its equilibrium response (Hansen et al., 2005). This first effect characterizing the climate issue is of critical importance to explain the behaviour of policy and decision-makers as well as the one shared by most stakeholders. Because of this climate lag, global warming is intractable: it is therefore extremely difficult to engage on a long-term action when the cause of climate change – a ton of CO2 – is itself impalpable and when its effects are still not directly perceived or experienced. Besides, most policy and decision-makers have to deal with many policy issues, most of which being essentially short-term. Immediacy and emotion are decision-makers’ best friends: indeed, promoting a new law to answer to a shocking news item is more likely to provide politicians with higher points in opinion polls than responding to a long-term policy issue. According to a UMP3 French deputy, modern democracies face an acceleration of politics: “captured by everyday’s life, politicians never stop running as if, according to the expression of Paul Virilio, we were going from democracy to dromocracy4”. When it comes to long-term policy issues such as climate change that include a certain degree of uncertainty (see Section 1.2.), policy and decision-makers do not have time to assimilate and digest the available scientific data on the impacts of climate change: as a result, the challenges are often under-evaluated, as “it is [often] imagined that slow processes such as climate change pose small risks” (Solomon et al., 2009). Yet, this assumption has proved to be incorrect.

What’s more, climate change and its associated dangerous effects could even become, beyond a certain greenhouse concentration threshold, irreversible. Most scientists now agree that once certain tipping points are reached, corrective action will remain unfruitful, no matter how determined and ambitious the international community will be. Indeed, if the world’s greenhouse gases emissions continue to grow, aggregated to past carbon emissions still remaining into the atmosphere, it is likely that in the next decade, the warming of climate will accelerate, triggered not so much by human activities but more by natural processes. To begin, by reducing the ability of the Earth’s surface to reflect and thus causing the absorption of more solar radiation through darker water surface, the melting of the Arctic’s summer sea-ice is expected to initiate a cascade of effects such as the warming of the surrounding oceans, the melting of the Siberian permafrost and the destabilisation of the Greenland icesheet (Hamilton, 2010). As James Hansen argues, “[c]ontinued growth of greenhouse gas emissions, for just another decade, practically eliminates the possibility of near-term return of atmospheric composition beneath the tipping level for catastrophic effects” (Hansen et al., 2008). Yet, irreversibility is a characteristic that is difficult to conceive for the political world, as it challenges the efficiency of political action and therefore questions the very role and legitimacy of policy and decision-makers. It is arduous for political actors to understand that the Earth’s climate, as Hamilton accurately writes it, is not like “a machine whose temperature can be regulated by turning policy knobs; it is a highly complex system with its own regulatory mechanisms” which humans cannot regulate. Besides, as a result of such irreversible climate threat, many political actors doubt the chances of success of long-term climate policies and therefore opt for poor contributions. Paradoxically, in order to preserve its credibility, a government is likely to lower its ambitions in terms of emissions reduction and, doing so, induce dangerous anthropogenic interference with the climate system: indeed, as Jon Hovi argues, “any government announcing a transition to a low-greenhouse gas economy during the 21st century would face a credibility problem precisely because this investment would not be profitable for several generations and a range of other problems are likely to arise over time (such as poverty reduction, financial crisis, financing social security, or fighting epidemics) that will make ex-post adherence to the ambitious climate goal unlikely” (Hovi et al., 2009).

This leads us to another type of time lag hampering climate policy and decision-making: the one between policy implementation/costs and policy effects/benefits. It has been estimated that by the end of the 21st century, global emissions of greenhouse gases should be reduced by 50 to 80% below 1990 levels if dangerous anthropogenic interference with the climate system is to be prevented (UNFCCC, Article 2). Such emissions cuts imply that the world economy should transition from a fossil-fuel based economy to a low greenhouse gas economy, a strategy that will most likely take longer than half a century (European Environment Agency, 2005). Policy and decision-making on climate are more difficult than on other policy issues because, an ex-counsellor to the French Prime Minister argues, the regulation of the climate issue implies decisions that modify short-term incomes and brusquely affect people’s everyday life while the results of such policies will only benefit to future generations. Because they make more losers than winners in the short-term, a climate policy and its associated public action instruments – regulation and market-based instruments – do not win the support of citizens: as a result, decision-makers, while supporting the broad goal of fighting climate change and reducing emissions, are rather reluctant to translate such approval into the specified measures required to reach that goal as they would threaten their political continuity. As Jon Hovi (2009) argues, concern with domestic political costs and benefits will normally make a government (i) more preoccupied with short term consequences, and (ii) more cautious in adopting policies that are perceived to impose costs on, or run counter to the values of, its own core constituency.

The inertia of the Earth’s climate system, the irreversibility of warming effects beyond certain tipping points and the time lag between policy costs and benefits make climate change a uniquely challenging and dangerous policy issue for decision-makers.

1.2. Uncertainties

Second, climate change, as a long-term policy issue, exhibits deep uncertainty, understood as “a situation where the system model and the input parameters to the system model are not known or widely agreed on by the stakeholders to the decision” (Lempert, 2002). Such uncertainty is scientific, economic and becomes therefore political: indeed, policy-makers, when assessing the costs and benefits of various policies to reduce greenhouse gas emissions, must grapple with numerous gaps in scientists’ understanding of the natural world (i.e. how the climate functions, and how the species will respond to climate change) as well as inherent difficulties in forecasting natural variability and human behaviour (for instance, the evolution of population growth and energy use over time)5. By permeating the understanding of climate change and complicating the assessment of policies as well as the choices between various policy instruments, both scientific and economic uncertainties hinder policy and decision-making. While in other policy areas, scientific and technical data is known and assimilated by policy-makers, a high civil servant from the French Ministry of Ecology, Sustainable Development Transports and Housing (MEDDTL) argues, designing climate policies is difficult because data is not available. Education is not a new policy issue, he continues: “a minister in charge of this policy area knows and masters most of the data. However, a minister in charge of climate policies has to make a decision with limited knowledge”.

At scientific level, major uncertainties complicate the assessment of the benefits of policies to reduce climate change, that is, the future damages that would be avoided by limiting emissions today. Those uncertainties are related to: (i) how greenhouse gas emissions will accumulate in the atmosphere and how the resulting change in concentrations will affect the average global temperature; (ii) how changes in global temperature will be distributed across seasons and regions and how they will affect other variable characteristics of climate, such as precipitation patterns, severity of storms and other weather and climate events, and sea level; (iii) how those changes in regional climates will affect natural and human systems, such as agricultural crops, property, species, and human health; and (iv) how short-term impacts will differ from the long-term impacts that will remain after natural and human systems have had time to adapt to the new climate (United States Congressional Budget Office, 2005). For instance, on the regional distribution of climate change impacts, the Intergovernmental Panel on Climate Change (IPCC) stated in its Second Assessment Report (SAR) that “[…] quantitative projections of the impacts of climate change on any particular system at any particular location are difficult because regional-scale climate change predictions are uncertain; our current understanding of many critical processes is limited; and systems are subject to multiple climatic and non-climatic stresses, the interactions of which are not always linear or additive”6. Likewise, twelve years later, the IPCC’s AR4 reveals similar key uncertainties on impacts, such as the strong scenario- and model-dependency of the projections of climate change and its impacts beyond 2050; and the limitation of impacts research by uncertainties surrounding regional projections of climate change7.

At economic level, difficulties relate to forecasting the costs of future mitigation policies – i.e. the costs that individuals, firms, and governments have to face to modify their behaviour in order to abate emissions, which depend essentially on the magnitude of future emissions. Yet future trends in emissions are uncertain, as linked to other demographic and economic trends such as the pace of population and economic growth, the development and diffusion of technologies, and the demand for fossil fuels and other consumption patterns. According to the six different scenarios developed by the IPCC, for 2100, projected annual emissions vary by roughly an order of magnitude, from less than 3 billion metric tons of carbon – less than half of today’s emissions – to 35 billion metric tons (IPCC, 2007). As a result, the assessment of the costs of reducing greenhouse gas emissions is highly ambiguous. For instance, according to the Stanford University Energy Modelling Forum, the estimated marginal costs to reduce greenhouse gas emissions to the levels required by the Kyoto Protocol for European OECD countries vary between US$ 25 per ton of CO2 and US$ 825 per ton of CO2 (Weyant, 1999).

The pervasive uncertainty inherent in many aspects of climate change presents policy and decision-makers with a challenge in attempting to develop appropriate policies. The potential stakes in policy choices are high, as a strict policy with ambitious emissions reduction targets could impose significant costs, whereas a lenient policy could ultimately lead to costly damages. As another MEDDTL high civil servant argues, public decision has to stick to climate change uncertainties: policy-makers should not act according to the worst scenario, nor should they wait until these uncertainties are unveiled to act. The major difficulty, he goes on, is to find the right public decisions, leaving policy-makers with the sufficient degree of flexibility so that they can reorient public action once scientific data will be available.

Yet, instead of adapting to climate uncertainties, public action has seemed to ground to a halt, as climate change’s numerous uncertainties are often erroneously interpreted by some actors from scientific and political areas as an uncertainty on the reality of anthropogenic climate change. Indeed, scientific uncertainty has perniciously favoured, for the past few years, the emergence of controversy. Besides, and in a paradoxical way, as the evidence accumulates, broadening the consensus within the scientific community, claims about the existence of global warming become more contested in the policy arena, therefore hindering effective policy-making. Financed by the fossil fuels industry, climate sceptics’ think tanks are assigned to engage in “consciousness lowering activities” and to “de-problematise” global warming (McCright and Dunlap, 2003). Those movements have been effective: the last Gallup Poll on global warming (April 2011) indeed finds that Americans and Europeans feel substantially less threatened by climate change than they did a few years ago (-10 points).

1.3. Global public good aspects

While environmental problems at the local, regional or even national level have been known and addressed for centuries, the idea that human activities are systematically transforming the environment on continental and global scales is relatively new. According to economics, climate is one of the rare – if not unique – global public goods, in a sense that averting the risk of global climate change by adopting an international agreement would indeed secure inter-generational as well as spatially widespread benefits8. However, because of these very characteristics, combined with non-rivalry and non-excludability public good’s qualities (Samuelson, 1954), climate as a global public good poses several challenges to policy-making at national level and hinders the adoption of a climate regime at international level.

First of all, whenever people have to maintain a public resource, such as protecting the global climate, they find themselves confronted to a social dilemma, which has been called “the tragedy of the commons” (Hardin, 1968). Such dilemma arises from a situation in which multiple actors, acting independently and rationally according to their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone’s long-term interest. In the 7 billion players’ global climate game, the social dilemma lies in the fact that while substantial emissions reductions are likely to have negative short-term economic effects, failure to accomplish this reduction may well incur dangerous climate change later, resulting in substantial collective human, ecological, and economic losses. Indeed, the Stern Report stated in 2006 that unabated climate change could cost the world at least 5% of GDP each year. While at national level, the production of public goods is ensured by the State, at international level, global public goods are to be provided by binding international regimes stemming from cooperation between States. Yet, the benefits of curbing emissions being both unpredictable, unevenly distributed and distant in the future, the production of a safer climate generates strong free-riding incentives, which arise when countries that benefit from global emissions abatement do not contribute toward its provision (Stavins, 1997). It is indeed difficult and very unpopular for decision-makers to convince people to give up part of their current wealth for the sake of uncertain gains in the future, maybe benefitting to populations in remote distance, such as populations living in climatic-sensitive areas in developing countries, or to populations in remote times – other generations. This reasoning partly explains the United States’ withdrawal from the Kyoto Protocol: while President Clinton signed the agreement in 1997, the treaty was not subsequently submitted to the Senate for approval in recognition of S.RES.989, a 1997 resolution indicating disapproval of any treaty that did not include legally binding commitments for developing countries. Finally, the Senate refused to ratify the Kyoto Protocol, citing potential damage for the US economy. Besides, some countries in the northern hemisphere – such as Canada and Russia – may even experiment positive effects from global warming, such as milder winters or longer growing seasons: as a result, the unequal distribution of climate change impacts weakens the incentive for collective action because some countries may as well hinder the efforts of others in order to increase their gain. The social dilemma previously mentioned is also noticeable at individual level: as a French Senator argues, while there is “a global shared interest in implementing a carbon tax at national level, this dimension is not essential and does not increase the acceptability of such measure because the benefits for population are uncertain. On such policy issue, the individual interest prevails, and as people knew they would have had to pay, they were against the adoption of such tax on carbon emissions”.

Secondly, when a country unilaterally decides to cooperate to the provision of the climate public good by engaging into an ambitious mitigation policy at national level, adverse effects such as carbon leakage occur and cancel the benefits of such policy. Leakage arises when abatement by cooperating countries alters world relative prices in ways that lead free-riders to increase their emissions. According to Robert Stavins, there are two main expressions of emissions leakage. First, “since a carbon abatement policy by cooperating countries may shift comparative advantage in carbon-intensive goods toward non-cooperating countries, he argues, production of such goods and emissions may rise outside the coalition”. This explains why some French policy-makers approved the adjournment of the domestic carbon tax project to the European level: as a civil servant from the Ministry for Agriculture claimed, “such measure had no sense in being implemented at national level as it would have had no major impact on global emissions at the end”. Most policy-makers indeed fear that strong domestic measures will paradoxically lead to poorly effective climate policies, as industries, and therefore employment and emissions, will simply migrate to other countries. Second, Robert Stavins goes on, “a unilateral policy may lower world demand for carbon-intensive fuels and thereby reduce the world price for such fuels traded in international markets. As a result, demands for such fuels (and emissions) can rise outside the coalition” (Stavins, 1997).

1.4. Cross-cutting nature

Finally, climate change is a cross-cutting issue. Because it involves most economic sectors, climate policy-making and policy-implementation face tremendous inertia, linked to values questioning, coherence issues, and administrative conflicts.
Global warming is fundamentally cross-cutting, as CO2 emissions stem from industry, transports, housing, agriculture/forestry/fisheries, electricity and heat production, wastes, etc. As a result, a policy designed to curb CO2 emissions should engage all the sectors mentioned above towards decarbonised production/consumption processes. However, such transition is hampered by individuals’ psychological meaning of consumption, and by States’ psychological meaning of growth, which have become barriers to tackling climate change. After World War 2, democracy and widespread material abundance in western countries provided for the first time the opportunity for individuals from lower and middle class households to pursue self-realisation. However, as Clive Hamilton argues (2007), “over the last two or three decades, the agents of the marketing society seized on the primal search for authentic identity to sell more gym shoes, cars, mobile phones and home furnishings” and therefore disseminated the idea that self-realisation and freedom were to be reached through consumption. As a result, resource use exploded: developed countries citizens consume an average of 16 tons of minerals, ores, fossil fuels and biomass per capita per year, while the average person in India today consumes 4 tons per year. Because most individuals define themselves through the way they consume and because increasing incomes and consumption have become an overarching goal in today’s society, a climate policy seeking to frame and limit consumption, through a cap-and-trade system or a carbon tax for instance, would not win the support of the population (Hamilton, 2010). Echoing the wish of their citizens, policy-makers promote the interests and alleged benefits of consumption, so their country can pursue the canonised goal of economic growth. While in developing countries economic growth remains crucial for reducing poverty, in developed countries the preoccupation with growth has now become unfounded. However, for most policy-makers, growth and progress/development are entwined: “to question growth, Hamilton continues, is to oppose progress and those who do are immediately accused of wanting to take us back to the Stone Age, […] as if the only alternative to the pursuit of opulence is living in squalor”. A 2003 survey led in France shows the resilience of such relationship between progress and economic growth among the perceptions of deputies and senators: to the question “What comes to your mind right away when hearing about development?” most deputies and senators’ answers (55%) were conveying traditional economic conceptions of development, as they were including notions – “growth”, “fight against unemployment”, “economic development” and “firm creation” – that “expressed the idea of an increase of the French industrial potential without considering its environmental consequences” (Boy, 2003). GDP support is dogmatic, not rational: Jeroen C.J.M. van den Bergh (2011) argues that GDP has become an undisputed priority in politics and thus acts as a systemic barrier to good mitigation policies. Yet, he continues, “[n]obody dares suggesting to entirely remove GDP information from political debate and economic policy reports”. The issue is that today, economic growth is still coupled with the resource use rate: as Figure 1 shows, the evolution of GDP between 1990 and 2005 follows the rate of global resource extractions. In literature, the Environmental Kuznets Curve (EKC) has established a causal relationship between GDP and emissions, shaped as an inverted U curve: starting from a low base, pollutants per capita and income per capita increase together until a certain income level is reached at which growth of the pollutant flattens and then reverses; the EKC implies that once a certain level of income has been reached, economic growth can be secured without a proportional increase in pollutants. However, the existence of an inverted U relationship between CO2 emissions and GDP has not yet been identified empirically. Some empirical studies even show that while there is overwhelming evidence of an inverted U-shaped trend for some emissions like sulphur dioxide (SO2) or oxides of nitrogen (NOx), the relation between CO2 emissions and GDP would be a monotonically increasing one (Shafik, 1994; Taskin and Zaim, 2000; Vollebergh et al., 2008). In this context, a strong climate policy imposing emissions reduction, and thus energy use restrictions, would be interpreted by most policy-makers as a renunciation of economic growth and progress.

Figure 1: Correlation between global material extractions and GDP (1900-2008)

Source: UNEP, derived from Krausmann et al., 2009

Figure 2: Global emissions of CO2 from fossil fuels (1900-2004)

Source: World Resources Institute, 2005

A climate policy also faces coherence issues, as it might go against some historically anchored sector-based policy measures. Such policy coherence issue is obvious in a sector like agriculture. Agriculture and climate are highly interconnected issues: according to the Food and Agriculture Organization, today agriculture contributes about 14% of annual greenhouse gas emissions, and land-use change, including forest loss, contributes another 19%. Highly exposed to international competition, agriculture is a sensitive sector that suffers from oil prices variations: farmers cannot compensate a rise in oil prices by increasing the prices of their products because these latest are fixed at international level. This is why some countries designed policy measures to protect the agricultural sector, in particular through tax exonerations or compensations. In France for instance, the main tax relief for the agricultural sector applies to fuels such as fuel oil, heavy fuel oil and natural gas. So, farmers are taxed €5.66 per hectolitre instead of €42.84 per hectolitre for households. Besides, in 2004, an additional provision was designed to help farmers face the financial crisis: farmers now benefits from a tax repayment on fuels (€5 per hectolitre for fuel oil and €1.665 per 100kg for heavy fuel oil) and natural gas (€1.071 per 1000kWh).

When combining these two tax reliefs, fuel for agricultural use is nearly tax-free (€0.66 per hectolitre). Besides, such tax policy measures apply to all farms without any condition: in particular, the energy tax reliefs are not conditioned to the farmer’s commitment to carry out an energy performance assessment. At the same time, France’s Grenelle Environnement Round Table10 defined in 2007 the following key objectives of environmental public policy for agriculture: (i) 30% of farms with low energy dependence by 2013, and (ii) increase organic agriculture from 6% to 20% of agricultural land use by 2020 (MEDDTL, 2009). We have to admit that the achievement of the first objective is likely to be hampered by the relief taxes granted to the agricultural sector since 197011. Lack of coherence between climate and agriculture policies results in high transaction costs and inefficiencies in achieving the emissions cuts required to avoid dangerous climate change.

Finally, the crosscutting nature of climate policies often involves several administrations in their conception. Yet, each administration uses its own cognitive and normative frameworks to conceive a public policy that fit their interests: as a result, conflicts between administrations may arise on the contemplation of a particular policy instrument and hinder policy-making. Here again, the French carbon tax project can provide us with some empirical data on this issue. At the Grenelle Environnement Round Table conclusions, the President Nicolas Sarkozy decided to “study the feasibility of a climate-energy contribution [or carbon tax] before confirming its creation” (MEDDTL, 2007). During a TV interview in February 2009, Nicolas Sarkozy announced its decision of suppressing the Business Tax12 to preserve French firms’ competitiveness: the deficit of the State’s budget resulting from this measure, assessed at €8 billion, was going to be compensated by the revenues generated by the possibility of implementing a climate-energy contribution. However, the political initiative from the government only arose after June 2009, consequently to the score of the French Green Party in European Elections13: a multi-actor dialogue, or “conference of consensus”, was to be organized in July 2009. The government prepared a white paper in which they defined the government’s position on the numerous modalities of the future climate-energy contribution, a paper that would serve as a basis for future discussions. The carbon tax called for the expertise and skills of two administrations: the Ministry of Ecology, in charge of the climate policy, and the Ministry of Finance, in charge of the tax policy, were indeed both pilot on the project. However, because the tax instrument was contemplated differently between such administrations – and even within the Ministry of Finance, policy-making was hindered. On the one hand, some directions within the Ministry of Finance, in charge of the writing of the carbon tax article – which was supposed to be inserted into the Financial Bill for 2010, as well as other administrations such as the Prime Minister’s Cabinet, traditionally contemplate a tax instrument as a way to raise State revenues. An ex-civil servant of the Ministry of Ecology reports that “Bercy [i.e. the Ministry of Finance] is always reluctant to propositions of new tax concepts stemming from other administrations for essentially two reasons: first, they want to be the only administration in charge of the tax system, and second, in their conception, a tax aims primarily at powering the State general budget”. “Bercy, he goes on, wants to maintain a full control on the conception of tax instruments. It might seem anecdotic but, in the administrative daily routine, it creates unexpected blockings. Besides, it seems to me that sustainable development is a concept that has not been yet assimilated by the Ministry of Economy: mocking ecology by saying it ruins the country is part of the Ministry’s mentality.” An ex-civil servant from the Ministry of Economy confirms such conception, when arguing that “the goal of the Direction of Budget is to limit public expenditure; thus, they always oppose to new policy measures that threatens the budget balance. They are paid to apply this principle”. At a rate of €17 per ton of carbon dioxide – which was the rate arbitrated by the President, the carbon tax would have raised €4.5 billion annually, with about 55% from households (€2.5 billion) and 45% from companies (€2 billion). With the suppression of the business tax (- €8 billion), the loss of income for the State still amounted to €6 billion (-8+2). On the other hand, the Ministry of Ecology designed the carbon tax as an economic instrument aiming to trigger consumers to adopt low-carbon behaviours: offsetting tax breaks were contemplated for households according to their behaviour-associated emissions, offsets that would effectively have made the tax revenue neutral, at least in the short term. In an interview to the Figaro newspaper (7/7/2009), the now former Minister for the Budget, Eric Woerth, radically opposed to such offsets: “Nothing has been arbitrated yet on the carbon tax. Such policy measure must aim at modifying our behaviours and at diverting us from the consumption of high-carbon goods. But does it mean we should grant offsets? That’s another question. Jean-Louis Borloo [now former Minister for the Ecology] suggested we take back the idea of an ecologist association [i.e. the ‘green cheque’]. As far as I am concerned, I am not in favour of distributing new cheques, whether they are green or not: the State has been distributing cheques for more than thirty years now and we are the country that most redistributes, €500 billion per year!” The carbon tax experience shows that ministries design policies according to their own cognitive framework and its associated arguments (public expenditure control for the Ministry of Budget vs. environmental efficiency and social equity for the Ministry of Ecology). In some situations, such frameworks are in opposition: as a consequence, interministerial conflicts emerge and hinder policy-making.

In the first section, we have argued that the aggregation of the long-term, uncertain, global, and crosscutting natures of climate change challenged traditional policy-making and delayed decision. In the following section, we will focus on extrinsic factors hampering the design and implementation of effective climate mitigation policies.

2. Extrinsic factors: politico-economic contingencies and macroeconomic expertise.

The inertia that characterizes the design and implementation of climate policies also stems from variables that are completely separate from the nature of the climate change issue. These variables relate to the economic and political context, both at domestic and international levels. First, we will analyse the role of politics in the climate policy and decision-making process. Second, we will focus on the influence of the timing of policy-making: we will argue that the economic and financial crisis that began in 2008 lead to important policy delays or setbacks. Finally, we will focalize on the specific issues that stem from the implementation of economic instruments to mitigate climate change. Relying on the French carbon tax experience, we will argue that the design and adoption of such instruments is hampered by a lack of connexion between economic expertise and political decision.

2.1. Power relations

Power relations determine how societies choose to respond to the climate challenge. Search for power, and politics in a broader sense, weigh negatively on climate policy and its decision-making process, both at international and domestic levels.

At international level, a political response to climate change is still hindered by traditional and twentieth century politics. Indeed, sustainable and low-carbon development is not yet considered as a power lever for changing the state of international power relations.
On the one hand, big emitters such as the United States condition their commitment to a binding international agreement on climate change to the participation of emerging countries to such agreement. According to United States’ discourse, committing to an international agreement that would not include emerging countries would hamper the competitiveness of their industries and would therefore threaten their position as the first economic power. Blame-shifting to preserve the state of actual power relations on the international arena is used both by decision-makers and industries to validate such disengagement: as the president of the American National Mining association declared in 2008, “reducing US emissions will not have any meaningful impact on atmospheric greenhouse gas concentrations when emissions from China and India already surpass our own”. In recent years, China has been an important scapegoat that allowed some developed countries to justify their disengagement in the production of a safer climate. Clive Hamilton argues that in Australia, conservatives have been using arguments such as “China is now the world’s biggest emitter” to justify that there is no point cutting emissions until China does. French high dignitaries have also been using similar arguments to justify the government’s setback on the carbon tax. As a counsellor working at the highest level reports, the fact that China builds a new coal-fired power plant every week justifies that an international regime must precede national constraints such as the implementation of taxes on carbon.

On the other hand, power relations between European Member States as well as within the European Commission downgraded EU’s carbon emissions ambitions. Indeed, before Copenhagen, the European Union conditioned the increase of its emissions reduction target from 20% to 30% by 2020 to the adoption of a binding international agreement. However, such agreement has still not been achieved. Yet, the proposal was introduced again to the European Parliament after a report by Green Member of Parliament (MEP) Bas Eickhout on the EU’s climate change policy had predicted that a 30% emission reduction target by 2020 was essential for the long-term target of reducing carbon emissions by 80% by 2050 from 1990 levels. However, since COP-15, Member States have been increasingly disagreeing on the ambitions of EU’s climate policy: while the Ministers for environment of United Kingdom, Sweden, Spain, Germany, Greece, Denmark and Portugal wanted to prompt the European Union to commit to a 30% reduction in CO2 emissions, other Member States including Poland and Italy opposed the plan14. The opponents indeed believe that the European Union should not take unilateral action to reduce carbon emissions especially when other major economies like the United States, China and India have not committed to such targets. Besides, they argue that the 30% target would result in added economic burden on many Member States already reeling from the shock of the economic recession: these Member States argue that increased targets could result in an increase in domestic energy prices which could even lead to companies shifting manufacturing bases out of Europe. On July 5th 2011, the MEPs voted against the proposal to increase EU’s emissions target to 30% (347 against; 258 in favour, 62 abstentions)15. Disagreements even arose within the European Commission between Climate Commissioner Connie Hedegaard and Energy Commissioner Günther Oettinger: while the former wants the emissions target raised to 30% to help the EU’s longer-term goal of 80-95% cuts by 2050, the latter favours maintaining the EU’s current 20% emissions reduction target for 2020, which he sees as the maximum that can be achieved without a “de-industrialisation” of Europe.

At domestic level, power relations within governmental administrations as well as between executive, legislative and jurisdictional institutions hinder the adoption of climate policies: the carbon tax decision-making process in France (2009-2010) gives us clear evidence of such politics-related driver for inertia. In France, policy-makers are gathered into 3 distinct circles (Muller, 2009). The first and most influential circle includes the President and its cabinet, the Prime Minister and its circle of counsellors and the Ministry of Finance. Within this circle, policy-makers define the priorities of public action and proceed to the most important arbitrations. The second circle comprises sector-based administrations such as the Ministry of Ecology and the Ministry of Agriculture. They define sector-based policies, adjusting them to the broader priorities and requirements defined by the previous overarching circle. The third circle gathers political and jurisdictional institutions such as the National Assembly, the Senate, the Constitutional Council and the State Council. Their role in decision-making can either be limited – in France the National Assembly can only influence decision marginally – or decisive – the Constitutional Council verifies the conformity to the Constitution of the laws defined by the government and can decide to censure it. The plan to introduce a tax on carbon emissions stemmed from the highest political level, the Presidency, and was actually a cornerstone of Sarkozy’s environmental policy. Two Ministries were mandated in March 2009 to define the technical options that could be contemplated for the instrument: the Ministry of Ecology, in charge of sustainable development and therefore of the climate policy, and the Ministry of Finance, in charge of the tax system.

Rivalries between administrations often hinder policy-making. We need to go back to the beginning of Sarkozy’s mandate in 2007 in order to understand power relations between the Ministries of Ecology and Finance. One of the first symbolic actions of Sarkozy as President was the administrative reorganization of the Ministry of Ecology: the mandates of the new “State Ministry” – a status that marks preeminence within the government – were broadened, as it obtained the Energy, Transports and Planning portfolios. Energy being the sinews of war, the Ministry of Ecology gained substantial power and weight in interministerial arbitrations. Besides, some of the measures it promoted, such as the Ecologic Bonus-Malus for cars, a tax instrument aiming at orienting consumers’ behaviour towards low-carbon emitting cars, even overlapped the mandate of other ministries, such as the Ministry of Finance. During the first years of Sarkozy’s mandate, the Ministry of Ecology joined the Ministry of Finance within the first circle of decision mentioned above. As a result, this rebalance of power between administrations created some frustrations among ministries that traditionally had been the most powerful ones. Because Ecology and Finance were both pilot ministries on the carbon tax policy-making process, the distribution of work created some discrepancies. An ex-civil servant from the Ministry of Finance reports that policy-making was hindered by a tough political fight between the Ministries of Economy and Ecology on the distribution of roles for the presentation of the project. On the one hand, the Ministry of Ecology was mandated to introduce the positive aspects of the project, such as the overall goal of the instrument, i.e. fighting climate change and promoting France as the leader of climate policy inside and beyond the European Union’s borders, as well as the offsetting tax breaks for households. On the other hand, the Ministry of Finance was left with the technical aspects related to taxing, such as the various options for the tax base and rate. Such distribution was not really accepted by the Minster of Finance, Christine Lagarde, who feared its consequences in terms of political image.

On September 10th 2009, the President Sarkozy arbitrated on the tax rate: the new tax would be set at €17 per ton of carbon16 and would be levied on oil, coal and gas consumption. The carbon tax project was inserted into the Financial Bill for 2010 and was presented to the Parliament on September 30th. Highly technical, the article of the financial bill dedicated to the carbon tax was not subject to virulent debates: some ex-members of the Finance and Ecology Ministries’ cabinets reported that the debate nearly entirely focalized on the suppression of the Business Tax, as it was going to affect the revenues of local authorities17. Unlike the vote on the Grenelle Environnement, the vote on the carbon tax showed a partisan split: indeed, while most right-wing representatives voted in favour of the project, the representatives belonging to left-wing and green parties voted against it. As some actors noted, every year, the vote on the financial bill is a question of politics. While green campaigners warned the tax was not high enough to be effective, the Socialists and consumer groups claimed it would lead to an unfair situation in which certain people, such as car-dependent households in isolated areas, would be hit harder than the real culprits. Yet, on October 23rd, the Parliament adopted the article on the carbon tax (42 votes in favour, 16 votes against). However, Socialist and Green representatives decided to seize the Constitutional Council, the authority that ensures the constitutionality of laws prior to their promulgation by the President of the Republic: according to the representatives of these parties, the carbon tax modalities as it had been contemplated by the government were unconstitutional. The Council’s seizure constituted the last appeal for left-wing and green representatives18 to invalidate and cancel the article on the carbon tax. As a UMP Senator argues, the financial bill, voted every autumn, is one of the most important Parliament’s and opposition parties’ power levers to oppose governmental projects. Since 1958’s Fifth Republic, France is a semi-presidential in which the Executive power, embodied in the President and its Government, is predominant. The debate on the financial bill, the Senator goes on, is therefore the scene of power relations between the Executive and Legislative powers.

Various articles of the financial bill, including Article 9 on the carbon tax, were submitted to the arbitration of the Constitutional Council. On December 29th, the Council invalidated the articles of the draft law related to the carbon tax as it noted that the law included too many exemptions and reliefs on industries, farming and fishing activities, while placing a disproportionately heavy burden on ordinary households. The Council found that “93% of carbon dioxide emissions of industrial origin, other than fuel, will be totally exempt from the carbon tax” and therefore stated that “[t]he large number of exemptions from the carbon tax runs counter to the goal of fighting climate change and violates the equality enjoyed by all in terms of public charges”19 (Conseil Constitutionnel, 2009). Indeed, although they were already submitted to the European Union Emissions Trading Scheme (EU-ETS), the Council considered the exemption of 1,018 of the sites of the worst polluters, including refineries, certain types of chemical plants, air transport, the double-use items industry, and cement plants, as unconstitutional. Most high-civil servants that worked on the project considered that, besides being the expression of the Sages’ lack of economic knowledge and expertise (we will analyse this point in Section 2.3.)20, the Council’s invalidation was a highly political decision rather than a jurisdictional one, as some said it was motivated by rivalries between Executive and Jurisdictional institutions. By invalidating one of Sarkozy’s most emblematic promises at a time when the President was at the height of his power, an ex-member of the Finance Ministry’s cabinet reported, the Council asserted its authority over the President’s. “It was a tremendous blow for the President and a great shock for the State apparatus in general”, he goes on. The Council’s political decision was an important setback to the carbon tax decision-making process: indeed, although the government started to work on a new project that would have taken into account the concerns of the Constitutional Council, the complexity of the project increased substantially. After the drubbing of the UMP party to the regional elections on March 2010, the government finally buried the project, arguing the measure needed to be supported by France’s European partners.

2.2. The financial crisis

The economic and financial situation at international level has substantial implications on climate policy, as it often determines its level of ambition. “I’m quite sure that the financial crisis will have effects on our climate policies. We’ll have less money to protect the environment because many countries have spent a lot of money rescuing their banks”, declared former – yet visionary – UNFCCC Secretary Yvo de Boer in an interview to Der Spiegel in 2008. While the financial crisis that hit the world in 2008 allowed most governments to recognize how unsustainable the financial boom of the past decades had been, the perspective of a low-carbon economy has been largely absent in the disorganized ways most countries have tried to counter this global financial downturn21. Governmental responses to such recession have even been harmful to the effective implementation of climate policies, political actors having to lower their sights in order to absorb the unexpected burdens on the state budget resulting from the economic recession. The bank rescue packages implemented by most western nations between 2008 and 2009 have accentuated the depth and breadth of the financial problem most developed countries now face and resulted in an outburst of public deficit22. In G-20 economies, the budget balance downgraded up to 6% of GDP between 2008 and 2009. In France for instance, public deficit increased from 2.7% of GDP to 7.5% of GDP between 2007 and 2009. French debt followed a similar trend as it reached €1.5 billion in 2009, amounting to 78% of GDP (Cour des Comptes). According to the Cour des Comptes in its annual report on the situation of public finances, “the increase of French public expenditure is in part imputable to the financial crisis and to the measures that have been decided to face it” (2010), i.e. a funding package totalling €360 billion to guarantee all bank debts issued before the end of 2009 with a duration of less than five years, agreed by French government in October 2008. The recession has indeed led to an increase of €4.1 billion of unemployment benefits, while public expenditure performed in the framework of the economic recovery plan has reached €7.5 billion. As the Cour des Comptes reports, the financial crisis and the economic recovery plan have contributed up to 2.9 GDP points to the 2009 deficit previously mentioned. In order to control the sovereign debt crisis, according to the International Monetary Fund (IMF), advanced economies would have to reduce expenditures and increase revenues up to 3 points of GDP. Thus, many countries now engage into austerity plans, which mostly consist in: (i) tax raises, (ii) privatisations, and (iii) public sector cuts, spending cuts, and benefits cuts. In this context, governments are more than ever reluctant to commit to exigent mitigation policies that would collectively cost 1% of world’s GDP to avoid the dangerous consequences that would imply a runaway climate change. As a civil servant from MEDDTL reports, “in times of crisis, political actors are less sensitive to the idea that long-term environmental priorities still need to be addressed when they face deficits, when firms are shutting down and when unemployment raises. Environmental priorities are supplanted by economic and social priorities”. Empirically, a report23 published by Ernst and Young in November 2011 shows that government austerity measures may reduce spending on renewable-energy subsidies, pollution abatement and research into clean technologies by $22.5 billion in the five years through 2015. Within the Euro-zone, the report argues that an escalation of the debt crisis could see as much as $45 billion slashed from climate spending. Therefore, this aspect of the resilience of climate policies in times of recession still needs to be improved.
So, in times of crisis, the short-term bias that characterizes democracies sharpens: public action rebalances towards short-term concerns such as employment, competitiveness, deficit control, to the detriment of medium or long-term concerns such as tackling climate change, echoing in that way the downfall in citizens’ perceptions of climate change as a serious threat. Indeed, according to a recent Gallup poll carried out on residents of 111 countries in 2010, the threat Americans and Europeans feel from global warming has dissipated (-9 points between 2007 and 2010 for American citizens and -10 points for Western Europe citizens). According to another Gallup poll carried out in the top five emitting countries in 2010, Americans are today less likely to attribute global warming to human causes (-11 points between 2007 and 2010). The Special Eurobarometer 313 dedicated to climate change shows a similar trend: in July 2009, the financial crisis dominated over climate change as the most serious problem among the perceptions of European citizens. “A major global economic downturn” has indeed more than doubled in mentions – from 24% in spring 2008 to 52% in February 2009: these increased mentions have resulted, the report states, in lower mentions for “climate change” – from 62% in spring 2008 to 50% in February 2009. A MEDDTL ex-civil servant argues that the effectiveness of some climate measures depends to a great extent on stakeholders’ behaviour, which is highly unpredictable: since the burst of the financial crisis in 2008, access to capital has become more difficult and has discouraged investments in low-carbon technologies; so, when aggregated, these behaviour changes considerably affect the outcome of a policy as well as future policy choices24. In parallel with its downgrade among citizens’ priorities, political actors ceased considering climate change as a priority for public action. As climate economist Christian de Perthuis reports, Nich Stern’s reasoning – spending 1 to 2% of world GDP today to increase 2050’s world GDP from 5 to 20% – has ceased to attract political actors and has even become counterproductive: “in order to get re-elected, he continues, political actors need a return to economic growth within six months; therefore, if a climate policy costs them 1% of GDP within six months and bring in benefits within 50 years, they won’t buy it!”. The main problem is that the solutions that would be economically viable for indebted developed countries such as a carbon tax or auctioned permits are in turn socially unviable: indeed, the social unacceptability of these types of instruments is exacerbated in times of recession, and any government that would decide to implement them without any compensation would shoot itself in the foot.

Therefore, the currently favoured solutions to tackle climate change lack economic viability in times of crisis as they would suppose the implementation of public subsidies to limit the impacts on consumer’s purchasing power and on industries’ competitiveness.

There is salient evidence of the lack of resilience of climate policies in times of financial crisis in the evolution of French government’s policy choices between 2007 and 2011. One of the most symbolic commitments of the soon-to-be elected presidential candidate Sarkozy in 2007 was the implementation of an innovating deliberative process – the previously mentioned Grenelle Environnement – that allowed stakeholders to reach a consensus on many important policy issues prior to the legislative process. Such multi-actors negotiations resulted in numerous propositions, gathered into two laws – Grenelle 1 and Grenelle 2 – respectively adopted by Parliament in July 2009 and June 201025. However, many stakeholders argue that the propositions promulgated by Parliament were downgraded with respect to the ones that were issued by the final Grenelle Environnement roundtables in October 2007. While the Government argues that the Grenelle Environnement represents an opportunity to address the financial crisis, many actors claim that the Grenelle’s spirit has crumbled with the economic downturn. Although most of the general objectives included in the Grenelle 1 law were maintained, the means to implement them did not follow accordingly. While the implementation of the fifteen programs of the Grenelle Environnement would require an amount of State investments around €12 billion per year (0.6% of GDP) according to the previsions of the Grenelle 1 law, the credits granted to finance the cross-sectoral Ecology and Sustainable development public policy have seriously decreased since 2007 (see Figure 3 below). Indeed, between 2007 and 2011, the amount of credits dedicated to the sustainable development policy fell by 8.6% while the total amount of credits available to the general budget raised by 7.3%.

Figure 3: Sustainable development expenses in French budget (2007-2011)

Source: author, on the basis of financial laws

For instance, the French government committed, in Article 2 of Grenelle 1 law, to “cut its GHG emissions by 20% by 2020, to achieve a 23% share of its energy consumption coming from renewable resources, and to reduce the primary energy use by 20% compared with projected levels by improving energy efficiency” (Legifrance, 2009). In Article 5, the French government planned to reduce by 38% energy consumption in existing buildings. A tax credit in favour of sustainable development and energy efficiency for house equipments following eligible performance standards was implemented in 2006 and strengthened after the Grenelle Environnement in 2008. The tax credit was fixed at 15% for the purchase of low temperature boilers, at 25% for the purchase of condensating boilers, thermal isolating materials, and heaters, and at 50% for renewable energy sources (OECD, 2011). The specifications regarding equipment covered were toughened in 2006, 2007 and 2009 to account for technological change. However, this tax incentive has been seriously planed down consequently to the financial crisis. For instance, the credit for heat pumps decreased to 40% in 2009 and 25% in 2010 for biomass or wood boilers, and heat pumps. Similarly, the financial law for 2011 reduced the tax credit for the purchase of solar energy appliances from 50% to 25%. Again this year, the budget project for 2012 plans to reduce the field of appliances eligible to the tax credit, and to cut the tax incentive from 22,5% to 20% for the purchase of solar panels. The expected economy for the State amounts approximately €1 billion. We therefore have to admit that the budgetary constraint induced by the financial crisis has had substantial negative implications on the implementation of appropriately resourced – and therefore effective – sustainable development and climate change policies: from 2008 onwards, some MEDDTL high civil servants argue that their Ministry began to lose arbitrations and credit within the government and its dignitaries were back to being considered as lacking seriousness and as having no sense of responsibility.

2.3. Economic expertise and decision: still a gap to bridge

The link between economic expertise and decision is a decisive factor in the design and implementation of a mitigation policy. Since the 1970s, the political process has gradually become more receptive to market-based or economic-incentive environmental tools, such as tradeable permits (Crocker, 1966; Dales, 1968; Montgomery, 1972) or emissions taxes (Pigou, 1920). These tools indeed started to predominate in the panel of national public solutions during the 1990s when at the international level the parties to the negotiations on a binding climate regime realized that pricing carbon was a powerful incentive that could be up to the mitigation challenge. Nathaniel O. Keohane, Richard L. Revesz and Robert N. Stavins (1997) identify several factors explaining this recent rise of the use of economic instruments: such include an “increased understanding of and familiarity with such economic-incentive and market-based instruments; niche-seeking by environmental groups interested in both environmental quality and organizational visibility; increased pollution control costs, which create greater demand for cost-effective instruments; attention to new, unregulated environmental problems without constituencies for a status quo approach; and a general shift of the political centre toward a more favourable view of using the market to solve social problems” 26. However, the political economy of instrument choice in mitigation policy shows that the most economically and environmentally-efficient instruments of action such as emissions taxes and auctioned permits still haven’t won the favour of policy-makers. And when they do, the political and legislative process often empties these instruments from their initial efficiency properties. There is therefore a great divergence between the recommendations of normative economic theory and positive political reality, a divergence that finds its origins in political, cultural and scientific factors.

Decision-makers tend to be risk-averse as for their political continuity: as a result, they will often opt for instruments that will not raise public debate. Command-and-control standards and grandfathered tradeable permits offer greater political gains to decision-makers than emissions taxes or auctioned permits. The costs regulatory measures and grandfathered permits impose on industries are indeed less visible, while auctioned permits or emissions taxes generally impose the costs more directly. Besides, strict standards can be combined with less visible exemptions or with lax enforcement: a decision-maker can therefore easily gain the support of different stakeholders, from environmental protection associations to pollutant industries. On the contrary, exemptions or compensations of specific stakeholders from an emissions tax are much more visible and therefore much more unacceptable. Part of the failure of the French carbon tax project can be attributed to this lack of acceptability: the tax was in the end mostly based on households’ energy consumption, as the project exempted industries taking part in the EU-ETS and planned multiple tax reliefs for the agriculture, fisheries and transportation sectors; as a result, the final version of the law adopted by the House of Representatives excluded 93% of CO2 industrial emissions. Also, decision-makers tend to privilege distributional issues over efficiency: as Robert N. Stavins reports in “What can we learn from the grand policy experiment? Lessons from SO2 allowance trading”, “legislators in a representative democracy are more concerned with the geographic distribution of costs and benefits than with comparisons of total benefits and costs”. Hence, he continues, “aggregate cost-effectiveness – the major advantage of market-based instruments – is likely to play a less significant role in the legislative calculus than whether a politician is getting a good deal for constituents” (1998). So, the right-wing majority that instigated the French carbon tax was not really supportive of the project as it did not satisfy the particular interests of its constituents, mostly composed of the well-off electorate27: in proportion to their income, the tax compensation for households, contemplated by the government to increase social acceptability, was to benefit more to low-income households than to high-income households. Also, the carbon tax went against the right-wing party dogma that traditionally opposes to any increase of tax levying. Many interviewees indeed noted that the decision-makers responsible for the political marketing of the project, in particular the Prime Minister and the Minister for Ecology did not truly make the effort to carry out a powerful media campaign to justify the tax because they actually did not entirely assume its creation.

Cultural aspects linked to decision-makers’ training are essential as well in understanding the lack of effective implementation of economic-incentive instruments. Many decision-makers have a law background and expertise which predispose them to favour regulatory instruments; besides, the time needed to learn about economic instruments may represent significant opportunity costs. In France for instance, the main higher-education institutes where most decision-makers stem from, such as the ENA (National Administration School) for instance, do not place economics at the heart of their training. Besides, as Robert N. Stavins argues, “government bureaucrats […] might be expected to oppose market-based instruments to prevent their expertise from becoming obsolete and to preserve their human capital”. As a result, high-level decision-makers do not completely master all the macroeconomic mechanisms linked to economic-incentive instruments and might not be able to establish the authority of such measures. In the case of the French carbon tax, a deputy regretted that the government did not come before the Parliament to explain the intellectual chaining sustaining the carbon tax. The level of economic complexity was even more significant in the case of the French experience because the price signal (tax) was to be integrally compensated through a lump-sum allowance, as the President promised the tax would be revenue neutral. While the device made sense because the government was levying the tax on a specific criterion (carbon content of energy consumption – see figure 4 on the price implications of a €17/ton of carbon on different types of fuels) and returning it on other criteria (household composition and place of residence28), this precise term was generally not understood either by high-level decision-makers or public opinion. The lack of macroeconomic expertise of high-level decision-makers, added to this complex term – that had been misinterpreted as “why taxing to return the money in the end?”, did not allow political actors to mobilize powerful arguments to justify the tax and increase its legitimacy. Instead of exposing the argument according to which the tax revenue could be used to: (i) realize lump-sum transfers towards households and (ii) decrease other taxes weighing negatively on employment and competitiveness – what economists call double dividend – high-level decision-makers limited themselves to use of the “fight against climate change” argument, which tends to be ineffective in times of crisis when the opinion rebalances towards short-term and concrete socioeconomic preoccupations. In spite of these obstacles, the carbon tax was adopted by Parliament on October 23rd 2009. However, as already mentioned, the Constitutional Council censured the tax as the EU-ETS industries’ exemption created a “characterised breach of equality before public charges” (Conseil Constitutionnel, 2009). The Constitutional Council’s reasoning shows that the expertises that are mobilized in the design of public policies remain compartmentalized. On the one hand, the economic expertise did not anticipate the legal risk created by the exemptions. And on the other hand, the legal expertise, unlike the economic theory, did not consider that the incentive produced by EU-ETS grandfathered permits and the one given by the domestic tax were similar.

Figure 4: French carbon tax applicable to different types of fuels

Source: General directorate of Treasury, French Ministry of finances, 2009

Finally, scientific aspects linked to the state of knowledge associated to the socioeconomic impacts of economic instruments are substantial in the design and implementation of these instruments. Some interviewees – decision-makers and trade unionists – claim that the existence of an imbalance between knowledge offer, stemming from economic experts, and knowledge demand, stemming from policy-makers, hampers the adoption of economic-incentive instruments. Macroeconomic models are often used in upstream policy-making to assess the impacts of mitigation policies on industry competitiveness, employment, balance of trade and households’ purchasing power. Traditionally, ministerial services in charge of assessing the impacts of a carbon tax have been using Walrasian multi-sector general equilibrium models, mostly for two reasons: (i) these models are the most widespread within the scientific community, as they match neoclassical economic theory; and (ii) these models are simple to run. Yet, Walrasian general equilibrium models neglect the impacts of the recycling of tax revenues on macroeconomic indicators such as the balance of trade, growth and employment. As a result, these models have difficulties to show the positive macroeconomic impacts of pricing CO2: in this type of models, production is determined by the available quantity of factors of production – i.e. labour, capital stock and primary energy; now, according to the model’s hypothesis, the implementation of a carbon tax would reduce the quantity of available energy and would in turn imply a decrease in GDP. It is then no wonder that decision-makers are reluctant to implement economic-incentive instruments if experts provide them with such macroeconomic reasoning. In the case of the French carbon tax decision-making process, the General Directorate of Treasury – Ministry of Finances – has used a Keynesian unisector model, MESANGE29. If this type of models is more complex than Walrasian models and takes into account market rigidities, its results remain unisector and only highlight the long-term macroeconomic implications of green taxes. Yet, as we have underlined it on various occasions in this paper, long-term in times of crisis is not mobilizing. As a result, decision-makers are not provided with the information that could increase the legitimacy and acceptability of the instrument: in 2009, the macroeconomic knowledge related to the impacts of a carbon tax by sector and by territory was not available30. At last, if most French high civil servants recognize that macroeconomic models are essential to decision-making, they tend to point out the lack of reliability of their simulations: their deficiencies relate to the unpredictability of stakeholders’ behaviour, concerning in particular the response of fossil energies’ consumption to their price increase, and to the use of the GDP indicator as a simplistic assessment of well-being.

In short, while economists have become an influent epistemic community31 in the upstream policy-making process, there are still significant barriers linked to knowledge, politics and culture that hamper the diffusion and adoption of efficiently-designed economic-incentive instruments to mitigate climate change.

3. Conclusions and implications for research and policy-making.

Addressing climate change is a great challenge for policy-makers in 2012. First, the intrinsic characteristics of the climate issue question traditional policy-making. We have seen in Section 1.1. and Section 1.3. that temporal and spatial climate specificities, such as the inadequacy between climate and democracy’s temporalities or the global benefits vs. local costs of action, act as powerful barriers to decision-making. As well, scientific uncertainties linked to climate change’s physical and economic impacts permeate the understanding of climate change by policy-makers and complicate policy design as well as policy instrument choice (Section 1.2.). We have also pointed out in Section 1.4. that climate change’s cross-cutting nature hampers the implementation of effective mitigation policies due to administrative competition in policy design and lack of policy coherence with respect to other sectors. Second, the effective implementation of mitigation policies hardly resist to a series of non-climate-related – i.e. extrinsic – factors. On the one hand, the financial and sovereign debt crisis has considerably reduced decision-makers’ willingness to address long-term policy issues such as climate change: the drastic cuts that were made in French budget dedicated to sustainable development policy, including mitigation, are an alarming testimony of such trend (Section 2.2.). Besides, because climate change’s acceleration is linked to human activities, its mitigation questions the dogma of GDP and economic growth, a system of belief on which decision-makers are not ready to give up: the current political and media attention on the financial crisis and necessary public responses reflects an extreme preoccupation with getting back as soon as possible on a fast GDP growth path, without any consideration on its social and carbon-related impacts. On the other hand, the prevalence of national interests in international climate negotiations, or institutional and personal interests in domestic policy-making have considerably affected the decision-makers’ ability to compromise on a post-Kyoto agreement or to adopt coherent mitigation policies (Section 2.1.). Finally, we have seen in Section 2.3. that while economists have become an influent epistemic community in the supply of new public solutions to mitigate climate change, cultural, scientific and political flaws in the diffusion of economic knowledge to decision-makers have hindered the adoption of efficiently-designed economic-incentive instruments.
It is however significantly erroneous to consider that decision-makers do not have leeway on such multiple barriers in these recessive times (see Figure 5). Policy-makers can indeed be provided with the means to engage into major and effective political action despite the economic downturn. We remain convinced that the solution lays in the implementation of efficiently-designed carbon or GHG emissions price signals. The conditions of political success of pricing carbon are twofold: acceptability and tutoring. Economic, social and political acceptability of economic-incentive instruments to mitigate climate change can be enhanced if such instruments are integrated within a fair and global tax reform, whose implementation must be sustained in time, and if these instruments are combined with accompanying policies – investments in transports and renewable energies – to facilitate access to low-carbon production and consumption modes. The example of northern European countries shows that: (i) reducing the rates of income taxes; (ii) giving a greater weight to general consumption taxes such as VAT; (iii) reducing environmentally harmful subsidies; and (iv) restructuring existing taxes according to environmental criteria and/or introducing new green taxes coupled with the reduction of capital/labour-related taxes, have provided these countries with a global macroeconomic benefit in the short and medium term, at the very moment when these countries were going through a major economic downturn (early 1990s). Thus, in the actual context of financial crisis, the challenge consists in demonstrating that economic-incentive instruments, within a global tax reform, could rapidly recreate economic value. Also, carbon taxes’ acceptability lies in a more widespread and legible diffusion of economic experts’ knowledge. Economic tutoring should be carried out with and between political actors, jurists and other major stakeholders involved in policy-making so that economic-incentive instruments are not emptied from their initial efficiency properties throughout the political process. Prior to policy and decision-making, economic experts should as well spread out the use of multi-sector and neo-Keynesian models to better reveal the short and medium term macroeconomic benefits of economic-incentive instruments – i.e. the double dividend – which constitutes key socioeconomic arguments for acceptability. In the end, economics holds a decisive role in bridging the gap between the main epistemic communities involved in the design of climate change mitigation policies. By bringing to light the immediate benefits of carbon or GHG emissions price signals, economics could knock down the environment versus growth dogma, while reconciling at the same time the three pillars that constitute sustainable development.

Figure 5: Mitigation policy barriers and levers

Source: author

4. References.

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CALLONNEC Gaël, REYNES Frédéric, TAMSAMANI Yasser Y. (2011). “Analyse macroéconomique et sectorielle de la fiscalité carbone en France”, Revue de l’OFCE, collection Débats et politiques, n°120, pp.123-154

Congressional Budget Office (2005). Uncertainty in analyzing climate change: policy implications, The Congress of the United States, http://www.cbo.gov/ftpdocs/60xx/doc6061/01-24-ClimateChange.pdf

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Cour des Comptes (2010). Rapport sur la situation et les perspectives des finances publiques, http://www.ccomptes.fr/fr/CC/documents/RSFPE/Rapport-situation-perspectives-finances-publiques-230610.pdf

De PERTHUIS Christian, SHAW Suzanne (2010). “Normes, écotaxes, marches de permis : quelle combinaison optimale?”, Les Cahiers Français, n°355

DEROUBAIX José-Frédéric, LEVEQUE François (2006). “The rise and fall of French Ecological Tax Reform: social acceptability versus political feasibility in the energy tax implementation process”, Energy Policy, vol.34, pp.940-949

ELBEZE Jérémy, de PERTHUIS Christian (2011). “Vingt ans de taxation du carbone en Europe : les leçons de l’expérience”, Les Cahiers de la Chaire Economie du Climat, n°9

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Financial Law for 2009, LOI n° 2008-1425 du 27 décembre 2008 de finances pour 2009, http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000019995721&categorieLien=id

Financial Law for 2010, LOI n° 2009-1673 du 30 décembre 2009 de finances pour 2010, http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000021557902&categorieLien=id

Financial Law for 2011, LOI n° 2010-1657 du 29 décembre 2010 de finances pour 2011, http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000023314376&categorieLien=id

Food and Agriculture Organization (FAO), http://www.fao.org/

Gallup Poll (April 20th, 2011), “Fewer Americans, Europeans view global warming as a threat”, http://www.gallup.com/poll/147203/Fewer-Americans-Europeans-View-Global-Warming-Threat.aspx

Gallup Poll (August 26th, 2011). “World’s top five emitters no more aware of climate change in 2010”, http://www.gallup.com/poll/149207/World-Top-Emitters-No-Aware-Climate-Change-2010.aspx

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Grenelle 2 Law, LOI n° 2010-788 du 12 juillet 2010 portant engagement national pour l’environnement, http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022470434

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5. Interviews.

Edward ARKWRIGHT, Caisse des dépôts et consignations, 29 septembre 2011
Martine BILLARD, Assemblée Nationale, 24 juin 2011
Jean-Christophe BOCCON-GIBOD, Ministère de l’écologie, 18 juillet 2011
Jean-Pierre BOMPARD, CFDT, 28 septembre 2011
Gaby BONNAND, CFDT, 10 octobre 2011
Xavier BONNET, Ministère de l’économie, 2 mai 2011
Dominique BUREAU, Ministère de l’écologie, 21 février 2011
Emeric BURIN DES ROZIERS, Ministère de l’écologie, 18 juillet 2011
Gaël CALONNEC, Agence de l’environnement et de la maîtrise de l’énergie, 13 octobre 2011
Gilles CARREZ, Assemblée Nationale, 19 juillet 2011
Henri CATZ, CFDT, 30 septembre 2011
Matthieu CHABANEL, Cabinet du Premier Ministre, 13 mai 2011
Loïc CHARBONNIER, Ministère de l’écologie, 30 juin 2011
Pierre-Franck CHEVET, Ministère de l’écologie, 8 juillet 2011
Raymond COINTE, Ministère de l’écologie, 29 mars 2011
Christian de PERTHUIS, Chaire Economie du climat, 9 mars 2011
Daniel DELALANDE, Ministère de l’écologie, 24 mars 2011
Béatrice DELEMASURE, Ministère de l’écologie, 7 avril 2011
Renaud DENOIX DE SAINT MARC, Conseil Constitutionnel, 11 juillet 2011
Benjamin FREMAUX, Ministère de l’économie, 6 juillet 2011
Elodie GALKO, Ministère de l’agriculture et de la pêche, 18 mai 2011
Benjamin GALLEZOT, Cabinet de la Présidence de la République, 12 mai 2011
Patrick GANDIL, Ministère de l’écologie, 11 avril 2011
Jean-Pierre GIRAN, Assemblée Nationale, 24 mai 2011
Thierry-Xavier GIRARDOT, Secrétariat général du gouvernement, 13 septembre 2011
Eric GIRY, Ministère de l’agriculture, 28 février 2011
Matthieu GLACHANT, Cerna, 6 mai 2011
Marc GUILLAUME, Conseil Constitutionnel, 9 septembre 2011
Christian JACQUOT, Ministère de l’agriculture et de la pêche, 19 avril 2011
Franck JESUS, Agence de l’environnement et de la maîtrise de l’énergie, 20 mai 2011
Thierry KALFON, Ministère de l’écologie, 9 septembre 2011
Fabienne KELLER, Sénat, 3 mars 2011
Jean-Bernard KOVARIK, Ministère de l’écologie, 14 juin 2011
Jean-Christian LE MEUR, Ministère de l’écologie, 25 juillet 2011
Henri LAMOTTE, Ministère de l’économie, 31 mars 2011
Elisabeth LAMURE, Sénat, 29 juin 2011
Jean LAUNAY, Assemblée Nationale, 19 mai 2011
Frédéric LEHMANN, Ministère de l’économie, 20 juillet 2011
Mathilde LEMOINE, HSBC, 17 mars 2011
Matthieu LOUVOT, Cabinet de la Présidence de la République, 14 septembre 2011
Claude MARTINAND, Ministère de l’écologie, 14 mars 2011
Christian MASSET, Ministère des affaires étrangères et européennes, 18 avril 2011
Philippe MAUGUIN, Ministère de l’agriculture et de la pêche, 23 mars 2011
Françoise MAUREL, Ministère de l’écologie, 21 septembre 2011
Benoît MELONIO, Ministère de l’écologie, 9 juin 2011
Jean-Jacques MIRASSOU, Sénat, 27 avril 2011
Jean-François MONTEILS, Ministère de l’écologie, 19 septembre 2011
Michèle PAPPALARDO, Ministère de l’écologie, 25 février 2011
Benoît PIGUET, Ministère de l’écologie, 6 octobre 2011
Nathanaël PINGAULT, Ministère de l’agriculture et de la pêche, 11 février 2011
Boris RAVIGNON, Cabinet de la Présidence de la République, 15 juin 2011
Laurence ROSSIGNOL, Parti socialiste, 1er juin 2011
Philippe THIEBAUD, Ministère des affaires étrangères et européennes, 8 mars 2011
Arnaud TOMASI, Ministère de l’écologie, 30 mai 2011
Philippe TOURTELIER, Assemblée Nationale, 6 avril 2011
Dominique VOYNET, Sénat, 21 juin 2011
Marc WOLF, Ministère de l’économie, 7 juillet 2011