Climate Webinar #7: Mitigation beyond Carbon Pricing

This seventh webinar of the JVI series on climate change economics focused on climate change mitigation policies. Putting a price on carbon is commonly considered the first-best climate mitigation policy, creating incentives to reduce greenhouse gas emissions. The actual reduction in emissions, however, will come from specific technological and behavioral changes, which can be fostered by other policies too.

In his presentation Jean-Marc Jancovici highlighted the central role played by energy consumption in economic activity. Indeed, historically, economic growth and energy use have been strongly correlated. What’s more, 80 percent of global greenhouse gas emissions are caused by energy use. Unfortunately, in the past, major technological breakthroughs (electricity, trains, computers) have not been accompanied by a decrease in emissions, on the contrary. Jean-Marc Jancovici therefore recommends that governments pursue concrete policies aimed at decreasing the carbon content of energy and the energy content of economic activity (GDP) where feasible. Where these policies do not achieve a sufficient decrease in emissions, "sobriety" (that is a decrease in GDP with the smallest possible impact on wellbeing) will prove necessary.

Gernot Wagner then explained that all known climate policies have an element of carbon pricing. Indeed, whether it’s the ban on incandescent light bulbs, industrial policy in electricity generation, subsidies for public transport, feed-in tariffs for renewable energies or emission standards for cars, all those policies that go beyond the traditional carbon pricing schemes (carbon taxes and cap-and-trade systems) make emitting greenhouse gases more expensive.

Responding to Jean-Marc Jancovici, Gernot Wagner acknowledged the steep increase in fossil fuel consumption throughout the 20th century but argued that this largely happened in the absence of climate policies setting the right incentives. The climate change mitigation policies being introduced, however, will impact behavior and technology and might lead to a rapid reduction in greenhouse gas emissions.

The JVI focus on climate change 

If greenhouse gas emissions continue unabated, global temperatures will keep on rising at an unprecedented pace, with catastrophic implications for lives and livelihoods worldwide. Economic policy has a pivotal role to play in changing the ways we produce and consume in order to slow climate change.  

Countries in the JVI region will not be spared the economic costs of rising temperatures nor the difficult task of transforming their economies within the next thirty years to drastically reduce greenhouse gas emissions. Yet, this transformation also holds opportunities for countries in the region, such as public investment-triggered growth, good quality green jobs, and better health from reduced air pollution.  

In this context, the JVI offers two new courses on the economics of climate change. The first one, "Climate Change and Green Finance," coordinated by the Austrian Federal Ministry of Finance and the Austrian National Bank, took place June 14-18, 2021. The second one, "Climate Change Economics," coordinated by the JVI faculty, took place September 13-17, 2021. Both courses will be taught again in 2022 and we encourage everyone to apply! 

Over the course of 2021 the JVI has organized a webinar series on selected issues in climate change economics. In discussion with experts from JVI partner organizations, academia, central banks, and other institutions, we will shed light on topics such as the political economy of climate change, carbon taxation, the role of financial sector oversight, and macroeconomic modelling – with a special focus on the JVI region.