Climate Change 2007 Update
9. How can governments create incentives for mitigation?
- 9.1 What are the implications of different policy instruments?
- 9.2 How is climate change mitigation linked to sustainable development?
9.1 What are the implications of different policy instruments?
A wide variety of policy tools can be applied by governments
to create incentives for mitigation action taking into account
national circumstances and interactions between policies.
Experience from various countries and sectors shows there are
advantages and drawbacks for any given policy instrument. It is
important to consider environmental effectiveness of policies
and instruments, their cost effectiveness, institutional
feasibility and how costs and benefits are distributed.
Examples of policies and instruments:
- Integrating climate policies into broader development
policies makes implementation easier.
- Regulations and standards generally provide some
certainty about emission levels, but they may not encourage
innovation and the development of new technologies.
- Taxes and charges can set a “carbon price” (a cost for
each unit of
emissions) and be an effective mitigation incentive, but
cannot guarantee a particular level of emissions.
- Tradable emission permits establish a “carbon price”.
The volume of allowed emissions determines their
environmental effectiveness, while the way permits are
allocated determines who bears the costs. Fluctuation in the
“carbon price” makes it difficult to estimate the total cost
of complying with emission permits.
- Subsidies and tax
credits can provide financial incentives for the development
and diffusion of new technologies. Though sometimes costly,
they are often critical to overcome barriers.
- Voluntary agreements between industry and governments
are politically attractive, raise awareness, and have played
a role in the evolution of many national policies. Only a
few of them have led to measurable emission reductions.
- Awareness campaigns may positively affect
environmental quality by promoting informed choices and
possibly contributing to behavioural change. However, their
impact on emissions has not been measured yet.
- Research, Development and Demonstration (RD&D)
can stimulate technological advances, reduce costs, and
enable progress toward stabilization.
Economic instruments, government funding or regulation that
lead to a “carbon price” (a cost for each unit of
greenhouse gas emissions)
could create incentives for producers and consumers to
significantly invest in products, technologies and processes
reduce greenhouse gas emissions.
Government support through financial contributions, tax
credits, standard setting and market creation is important for
effective technology development, innovation and deployment.
Effective transfer of technology to developing countries
requires appropriate financial, institutional, policy, legal and
Table SPM-7: Selected sectoral policies,
measures and instruments that have shown to be
environmentally effective in the respective sector in at
least a number of national cases.
The impact of the Kyoto protocol’s first commitment period
2008-2012 on global carbon emissions is expected to be limited.
However, notable achievements of the United Nations Framework
Climate Change (UNFCCC) and
its Kyoto protocol are the establishment of a global response to
the climate problem, stimulation of an array of national
policies, the creation of an international carbon market and the
establishment of new institutional mechanisms that may provide
the foundation for future mitigation efforts.
9.2 How is climate change mitigation linked to sustainable development?
Switching to more
paths can make a major contribution to
climate change mitigation,
but implementation may require overcoming multiple barriers.
Climate change and other
policies often benefit each other, though not always. There is a
growing understanding of the possibilities to choose and
implement mitigation options in several sectors to create
synergies and avoid
conflicts with other aspects of sustainable development.
climate change policies
related to energy efficiency and renewable energy are often
economically beneficial, improve energy security, and reduce
local air pollution. Reducing both loss of natural habitat and
deforestation can have
significant benefits for
biodiversity, soil and
water conservation, and can be implemented in a socially and
No matter how stringent the mitigation measures, some impacts
of climate change are
unavoidable and adaptation
will be necessary.
Sustainable development can
increase the capacity for both adaptation and mitigation, and
reduce vulnerability to the impacts of climate change.
Gaps in knowledge remain regarding some aspects of mitigation
of climate change,
especially in developing countries. Additional research
addressing those gaps would further reduce uncertainties and
thus facilitate decision-making related to mitigation of climate