1. What stands in the way becomes the way
Sequencing in climate policy to ratchet up stringency over time
AHEAD Workshop Berkeley
2 October 2017
Christian Flachsland
I want to do two things:
Very short intro to German Energiewende, mainly targets – my colleagues will follow
Present first AHEAD project working paper on sequencing, title of this talk

2. Germany GHG emissions and reduction targets
EU 2050:
-80% to
-95%
EU 2020:
-20%
EU 2030:
-40%
2016:
-27%
2020:
-40%
2030:
-55%
2040:
-70%
2050:
-80% to
-95%
Energy
Residential
Transport
Industry
Germany GHG targets: 2050 towards today.
Not on track – 2020 goal missed with current policies
Development of sector GHG emissions:
Energy stable – 11GW new coal plants since 2000  Substituting nuclear, old coal power
Coal exit debate for 2030
Residential slight reduction
Industry declined
Transport increasing trend
In context of diesel debate now also ICE exit debate 2030 by green party
Embedded in EU goals:
Name goals
Sometimes difficult to achieve German goals in context of EU goals: If EU policies regulate German emissions  EU ETS, but also vehicle efficiency
Agriculture
other emissions
goals
*GHG targets are relative to 1990
UBA (2016), Agora Energiewende (2016)

3. Energiewende targets legally binding Many targets
Nuclear phaseout not shown
in particular renewables in power sector (which are also legally binding, others only indicative)
But also much efficiency focus in targets

4. Ratcheting up of renewable and climate targets over time
2050
stringency (policy targets)
40% in
2030
30% in
2020
20% in
2020
20% in
2020
*2 in
2010
2005
2010
2015
DE renewable targets
EU GHG targets

5. Our starting point
Climate policy stringency needs to ratchet up significantly to achieve 2°C
Some questions
Do we simply need more of the same policies?
Will current approaches dominated by policies supporting specific technologies prevail so that they can just be scaled up?
Or do we need something different, such as ambitious carbon pricing?
In the long-term, significant carbon pricing benchmark policy for low-cost decarbonization
In the short-term, significant carbon pricing has faced strong barriers. Other policies have been feasible
Some of these policies apparantly enabled ratcheting up policy ambition
They might have also contributed to preparing the future introduction of significant carbon pricing

6. Conceptual Model stringency B C C A A B Policy Policy time t=1 t=2 2 1

7. Barriers Sequencing options 1. Cost 2. Distribution 3. Institutions
High technology costs
Drive down technology costs through dedicated green technology (industrial) policies
Lack of policy cost-effectiveness
Phase in more cost-effective policies:
Phase out technology policies once technologies are mature
Infuse regulation with incentives, ultimately reaching carbon pricing (first-best)
Increase sectoral coverage of policies
1. Cost
Specific barrier
Sequencing option
Opposition by regulated interest groups
Use targeted exemptions and compensation to get consent
Employ sectoral differentiation, such as policies with lower stringency (or more compensation) in sectors with higher political opposition
Lack of supporting coalition
Prioritize policies (e.g., green industrial policies) that expand supporting constituencies
Counteract regressive effects with complementary policies and programs
2. Distribution
Specific barrier
Sequencing option
Lack of expertise and capacity
Build on existing agencies and policy tools doing related work to set up new policies
Draw on related policy domains or other jurisdictions in designing policies
Long-term versus short- term interests
Create new institutions politically insulated or otherwise able to focus on long-term
Implement policies that are resistant to rollbacks (e.g., create property rights)
Codify regulatory actions through legislation; that is, make them legally binding
Veto points
Select initial policy options that face reduced veto points and that can also build political support to overcome more stringent veto points in the future
Public participation
Allow public notice and comment; hold public hearings for major decisions
Allow judicial review agency decisions to ensure public voices are recognized
3. Institutions
Specific barrier
Sequencing options
Free riding, lack of intern. institutions
Develop an international climate regime
Build climate coalitions: Linking, Transfer
Choices and preferences of other jurisdictions
Take advantage of “reverse leakage”: Market technology and policy diffusion
4. Free-Riding

8. Barriers Sequencing options 1. Cost 2. Distribution 3. Institutions
High technology costs
Drive down technology costs through dedicated green technology (industrial) policies
Lack of policy cost-effectiveness
Phase in more cost-effective policies:
Phase out technology policies once technologies are mature
Infuse regulation with incentives, ultimately reaching carbon pricing (first-best)
Increase sectoral coverage of policies
1. Cost
Specific barrier
Sequencing option
Opposition by regulated interest groups
Use targeted exemptions and compensation to get consent
Employ sectoral differentiation, such as policies with lower stringency (or more compensation) in sectors with higher political opposition
Lack of supporting coalition
Prioritize policies (e.g., green industrial policies) that expand supporting constituencies
Counteract regressive effects with complementary policies and programs
2. Distribution
Specific barrier
Sequencing option
Lack of expertise and capacity
Build on existing agencies and policy tools doing related work to set up new policies
Draw on related policy domains or other jurisdictions in designing policies
Long-term versus short- term interests
Create new institutions politically insulated or otherwise able to focus on long-term
Implement policies that are resistant to rollbacks (e.g., create property rights)
Codify regulatory actions through legislation; that is, make them legally binding
Veto points
Select initial policy options that face reduced veto points and that can also build political support to overcome more stringent veto points in the future
Public participation
Allow public notice and comment; hold public hearings for major decisions
Allow judicial review agency decisions to ensure public voices are recognized
3. Institutions
Exemptions: EU ETS + Feed-in tariffs
Specific barrier
Sequencing options
Free riding, lack of intern. institutions
Develop an international climate regime
Build climate coalitions: Linking, Transfer
Choices and preferences of other jurisdictions
Take advantage of “reverse leakage”: Market technology and policy diffusion
4. Free-Riding

9. Renewable electricity feed-in tariff cost development
Source: BDEW (2016)
Annual costs of support has risen to more than 23 bil. € (>60 €/MWh)
~50% for solar pv (~20% of all RE power production)
Expected decline after 2025 when old installations stop receiving subsidies
Auctioned contracts for difference

10. Barriers Sequencing options 1. Cost 2. Distribution 3. Institutions
High technology costs
Drive down technology costs through dedicated green technology (industrial) policies
Lack of policy cost-effectiveness
Phase in more cost-effective policies:
Phase out technology policies once technologies are mature
Infuse regulation with incentives, ultimately reaching carbon pricing (first-best)
Increase sectoral coverage of policies
1. Cost
Specific barrier
Sequencing option
Opposition by regulated interest groups
Use targeted exemptions and compensation to get consent
Employ sectoral differentiation, such as policies with lower stringency (or more compensation) in sectors with higher political opposition
Lack of supporting coalition
Prioritize policies (e.g., green industrial policies) that expand supporting constituencies
Counteract regressive effects with complementary policies and programs
2. Distribution
Specific barrier
Sequencing option
Lack of expertise and capacity
Build on existing agencies and policy tools doing related work to set up new policies
Draw on related policy domains or other jurisdictions in designing policies
Long-term versus short- term interests
Create new institutions politically insulated or otherwise able to focus on long-term
Implement policies that are resistant to rollbacks (e.g., create property rights)
Codify regulatory actions through legislation; that is, make them legally binding
Veto points
Select initial policy options that face reduced veto points and that can also build political support to overcome more stringent veto points in the future
Public participation
Allow public notice and comment; hold public hearings for major decisions
Allow judicial review agency decisions to ensure public voices are recognized
3. Institutions
Exemptions: EU ETS + Feed-in tariffs
Specific barrier
Sequencing options
Free riding, lack of intern. institutions
Develop an international climate regime
Build climate coalitions: Linking, Transfer
Choices and preferences of other jurisdictions
Take advantage of “reverse leakage”: Market technology and policy diffusion
4. Free-Riding

11. Outlook More empirical and theoretical research required
Develop solid theory of climate policy sequencing that can inform policymaking?
Some avenues for future research:
Identify previously successful sequencing options, build tool kit of approaches?
Identify conditions under which sequencing has been successful (or not)?
Recognize and avoid „bad“ lock-ins?
Better understand intentional vs. non-intentional sequencing?
Develop transition indicators to evaluate sequencing progress?
Carefully disentangle welfare economics vs. political economy considerations in policy advice

12. „The impediment to action advances action.
What stands in the way becomes the way.”
Marcus Aurelius ( AD)
RFF Report available at
what-stands-way-becomes-way-sequencing-
climate-policy-ratchet-stringency-over