World's most effective climate policies identified in new study

Countries around the world have implemented carbon pricing, electric vehicle incentives and thousands of other policies in an effort to cut carbon emissions and slow climate change. But which ones actually work? A new global study has uncovered 63 of the most effective policies, and found some helpful patterns.

Felix Pretis, a Canadian-based co-author of the study published today in Science, said the research offers both hope and pointers to drive more effective climate action.

"There's a whole set of policies that have already led to significant reductions," said Pretis, an associate professor of economics at the University of Victoria "There are definitely success stories we can turn to."

One was a big drop in the U.K.'s emissions from electricity with a combination of carbon pricing, subsidies for renewable energy and a coal phase-out plan. The U.S. cut transportation emissions with a mix of tax incentives and subsidies for EVs and tighter standards on carbon emissions.

A notable Canadian example was a drop in industrial carbon emissions with carbon pricing and emissions cap-and-trade policies.

All 63 success stories have been compiled into a searchable online dashboard that the researchers hope will help policy makers.

The study uncovered some key patterns about what works best. First of all, mixes of policies that include both incentives to reduce carbon emissions and deterrents to generating emissions tended to be more effective than single policies, such as incentives, carbon pricing or regulations, alone. Secondly, it found that carbon pricing was more effective in the industrial and electricity sector, dominated by businesses, than in the building and transportation sector, where individual consumers make decisions about their homes and cars and mixes of "carrots" and "sticks" were key.

How researchers figured out which policies work

Human-caused climate change is driven mainly by burning fossil fuels, which releases heat-trapping carbon emissions into the atmosphere. Under the Paris Agreement on climate change, many countries, including Canada, have implemented policies to cut emissions and eventually reach net zero emissions (where they are absorbing as many emissions as they emit.)

Pretis said the problem is "we really lack an understanding of which ones work."

Many past studies have tried to uncover the effect of individual policies, but have looked at only a small fraction of 1,500 policies around the world.

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Pretis and collaborators in Germany and the U.K., led by Annika Stechemesser at the Potsdam Institute for Climate Research in Germany, took a different approach.

They started with a database of climate policies in 41 countries managed by the Organisation for Economic Co-operation and Development (OECD), which divided them into four sectors: industry, electricity, transport and buildings.The researchers used computer algorithms to look for big emissions drops larger than 4.5 per cent in those sectors and countries, while filtering out economic fluctuations such as the COVID-19 pandemic. They compared the timing of those emissions drops to the implementation of 1,500 climate policies listed in a database between 1998 and 2022 and used statistics to link them.

The 63 successful policies identified led to emissions reductions of between 0.6 billion and 1.8 billion metric tonnes.

The researchers said implementing some of those policies in other countries before 2030 could significantly cut countries' emissions and help them get closer to meeting their emissions targets.

Carbon pricing works for developed countries but not developing ones

Jennifer Winter is an economics professor at the University of Calgary whose research is also focused on climate policy.

She said the approach used by Pretis and his colleagues was novel and interesting, and she appreciated that the paper included both developed economies and developing ones, which are less studied.

The new study found that carbon pricing didn't work as well for developing countries.

The researchers said that was consistent with other research showing incentives and disincentives that rely on pricing don't work well without "liberalized markets."

Pretis said in lower-income countries, economies are less formal, and there may not be anyone to calculate, collect or track things like carbon taxes.

For developed countries, the study found a combination of pricing, subsidies and regulation worked.

"What's quite interesting," Winter observed, "is that all three types of emission reduction policies matter for reducing emissions."

Carbon pricing and incentives work together

She said the new study provides important evidence that climate policies are working.

"One of the most common questions I'm asked in interviews is 'Does carbon pricing work?'" she said. The new research is "evidence that yes, with the data we have available, emission pricing is resulting in emissions reductions. And we also now have evidence that the other policies introduced by governments to help reduce emissions are also resulting in emissions reductions."

Winter and some colleagues published a blog post Thursday on trends in climate policies within Canada, based on a national database of climate policies analogous to the OECD's international one. The database is a collaboration with the Canadian Climate Institute's 440 Megatonnes project, which tracks Canada's progress in cutting emissions.

It found that in Canada, policy "carrots" that incentivize voluntary action make up 71.5 per cent of policies, vastly outnumbering policy "sticks."

Stewart Elgie, an environmental law professor at the University of Ottawa and founder of Sustainable Prosperity, a sustainable economy think-tank, points out that the new study shows subsidies are most effective when combined with pricing, regulation or both.

"We're not going to reduce emissions unless we use both carrots and sticks," he said.

He said he thought the way the study was done was "really clever" and it's probably the most comprehensive study of climate policies and their impacts worldwide to date, with some important insights.

"First, we're making progress in the fight against climate change," he said. "We're on the right path but we need to keep going. We need to keep bringing in the types of policies that are underway [in other countries] right now, and we need to stick with carbon pricing as the foundation of our climate policies."