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Advancing the Science of Climate Change (2010)

Chapter: 17 Designing, Implementing, and Evaluating Climate Policies

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Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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CHAPTER SEVENTEEN
Designing, Implementing, and Evaluating Climate Policies

Governments broadly recognize the risks posed by climate change. From the local to the international level, many governments have considered and adopted policies designed to limit the magnitude of climate change and adapt to its expected impacts. Consequently, better understanding of climate policies is paramount to inform public- and private-sector decisions regarding climate change. Policy options are many and complex. For instance, the Intergovernmental Panel on Climate Change (IPCC) identifies six basic forms of policy instruments intended to directly reduce greenhouse gas (GHG) emissions and 53 different proposals for structuring international agreements to limit climate change (Gupta et al., 2007; see also Aldy and Stavins, 2007). Climate policies for adaptation are less well developed and mostly codified at the international level through the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol (see also NRC, 2010a). Understanding how well implemented policies are working, or how proposed policies will work, requires scientific research on both current and possible future climate policies.


In general, how a policy actually works depends to some degree on all aspects of institutional design and on interaction with other policies and actors in the decision environment (Hill and Hupe, 2009; Mazmanian and Sabatier, 1981; Pressman and Wildavsky, 1984; Sabatier, 1986; Scheberle, 2004; Victor et al., 1998). Thus, questions that decision makers are asking, or will be asking, about climate policy include the following:

  • What are the potential consequences of different GHG emissions-reduction targets—both in terms of climate change-related impacts and in terms of costs, feasibility, and other socioeconomic factors?

  • What are the advantages and disadvantages of different policy instruments designed to pursue emissions targets, including their expected effectiveness, cost, robustness, adaptability, administrative burden, and distributional effects across different sectors, regions, and groups?

  • What insights can scientific research and analysis provide about interactions (and especially the potential for conflict) among different climate-related policies? Are there policies that can contribute to both limiting climate change and adapting to its impacts? How can we avoid the potential for one type of policy to undermine another?

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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  • How should different preferences across different sections of society be weighed? Who stands to gain and who stands to lose under different kinds of climate policies? How will climate policies interact with other policy objectives, such as moving toward sustainability?

  • What does science tell us about building political support for policy implementation?

This chapter summarizes the scientific aspects of climate policy, including how science can contribute to policy design as well as its implementation and evaluation. Strengths and weaknesses of different policy approaches have been examined substantially in the scientific literature, and this chapter provides an overview of the general conclusions that have been reached by the IPCC and others as a prelude to identifying key areas for further research. For an actual assessment of current policies being considered in the United States to limit the magnitude of future climate change, see the companion report Limiting the Magnitude of Future Climate Change (NRC, 2010c); for a more detailed description of potential policy approaches related to adaptation to climate change, see the companion report Adapting to the Impacts of Climate Change (NRC, 2010a). The companion report Informing Effective Decisions Related to Climate Change (NRC, 2010b) also contains a detailed treatment and analysis of various policy mechanisms, as well as other approaches for improving climate-related decision making. The last section of the chapter summarizes research that is needed to support understanding of the interaction of climate change with natural and social systems, as well as policy design and implementation.

TYPES OF CLIMATE POLICIES AND AGREEMENTS

While there is a great deal of complexity and nuance involved in policy assessment, the IPCC (Gupta et al., 2007) concludes that there is “high agreement” and “much evidence” to support a number of conclusions about the major kinds of national policies that have been proposed and in some cases implemented to limit climate change. The IPCC also points out (see Table 17.1):

  • Direct regulation, when enforced, can reduce emissions.

  • Taxes are cost effective but do not guarantee a particular level of emissions reductions and are hard to adapt and adjust.

  • The environmental effectiveness and cost effectiveness of tradable permits depend on the structure of the policy, including the number of permits issued, how they are distributed, and whether permits can be banked.

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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  • Voluntary agreements between industry and government have played a role in the evolution of national policies and have accelerated adoption of best available technology but have not achieved significant emissions reductions.

  • Subsidies, support for public research and development, or other incentives to develop and adopt new, low-emitting technologies, when used alone, have higher costs than other approaches; however, these strategies can complement policies targeting emissions directly via market mechanisms and enhance their overall environmental and cost effectiveness (this is particularly important when markets alone fail to achieve needed reductions in emissions; see also Jaffe et al., 2005).

  • While information programs alone do not seem to lead to substantial emissions reductions, they can improve the effectiveness of other programs.

  • A well-designed mix of policy types can be more effective than a single “pure form.”

The companion report Limiting the Magnitude of Future Climate Change (NRC, 2010c) contains an extensive analysis of the advantages and disadvantages associated with different climate change policy options for reducing U.S. GHG emissions.


At the international level, climate policies have been codified in the UNFCCC and the Kyoto Protocol. Policies for limiting the magnitude of climate change are implemented through a variety of mechanisms such as the Clean Development Mechanism (CDM) and Joint Implementation. While experience with climate change treaties is limited, there is a substantial literature examining other environmental agreements that can provide insights of relevance to climate treaties (e.g., Biermann et al., 2009b; Mitchell, 2003; Young, 2002a,b, 2008, 2009). Drawing on this evidence, the IPCC (Gupta et al., 2007) concludes that there is, as with national-level policy instruments, “high agreement” and “much evidence” to support a number of conclusions about international treaties. The Kyoto Protocol has stimulated national policies and the creation of carbon markets, but its economic impacts are not clear, and its overall ambition with regard to emissions reduction has been limited. There is broad agreement in the literature that, to be successful, a successor agreement to Kyoto will have to be both environmentally effective and cost effective, take account of distributional and equity considerations, and be institutionally feasible (Aldy and Stavins, 2007). These goals are most likely to be achieved if the agreement incorporates goals, specific actions and timetables, rules for participation, and institutional arrangements and provisions for reporting and compliance. Of particular importance are the extent of engagement by national governments and the stringency and timing of the goals (Gupta et al., 2007).

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

TABLE 17.1 National Environmental Policy Instruments and Evaluative Criteria

Instrument

Criteria

Environmental effectiveness

Cost-effectiveness

Meets distributional considerations

Institutional feasibility

Regulations and Standards

Emission levels set directly, though subject to exceptions

Depends on deferrals and compliance

Depends on design; uniform application often leads to higher overall compliance costs

Depends on level playing field; small/new actors may be disadvantaged

Depends on technical capacity; popular with regulators, in countries with weak functioning markets

Taxes and charges

Depends on ability to set tax at a level that induces behavioral change

Better with broad application; higher administrative costs where institutions are weak

Regressive; can be improved with revenue recycling

Often politically unpopular; may be difficult to enforce with underdeveloped institutions

Tradable permits

Depends on emissions cap, participation and compliance

Decreases with limited participation and fewer sectors

Depends on initial permit allocation, may pose difficulties for small emitters

Requires well-functioning markets and complementary institutions

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

Voluntary agreements

Depends on program design, including clear targets, a baseline scenario, third-party involvement in design and review, and monitoring provisions

Depends on flexibility and extent of government incentives, rewards and penalties

Benefits accrue only to participants

Often politically unpopular; requires significant number of administrative staff

Subsidies and other incentives

Depends on program design; less certain than regulations/standards.

Depends on level and program design; can be market-distorting

Benefits selected participants; possibly some that do not need it

Popular with recipients; potential resistance from vested interests. Can be difficult to phase out

Research and development

Depends on consistent funding, when technologies are developed, and policies for diffusion. May have high benefits in long term

Depends on program design and the degree of risk

Initially benefits selected participants; potentially easy for funds to be misallocated

Requires many separate decisions; depends on research capacity and longterm funding

NOTE: Evaluations are predicated on assumptions that instrument are representative of best practice rather than theoretically perfect. This assessment is based primarily on experiences and literature from developed countries, since peer-reviewed articles on the effectiveness of instruments in other counties were limited. Applicability in specific counties, sectors, and circumstances—particularly developing counties and economies in transition—may differ greatly. Environmental and cost effectiveness may be enhanced when instruments are strategically combined and adapted to local circumstances.

SOURCE: Gupta et al. (2007).

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

The IPCC (Gupta et al., 2007) notes that a large number of actions are being undertaken to reduce emissions by corporations, by local and regional governments (including U.S. states), and by nongovernmental organizations. It concludes that there is “high agreement” and “much evidence” that these actions have some effect on emissions and stimulate innovative policies and technologies but generally have limited impact in the absence of national policies.


On the adaptation side, as mentioned earlier, the UNFCCC and the Kyoto Protocol support adaptation planning and action through the National Adaptation Programmes of Action for 49 Least Developed Countries and have created the Adaptation Fund “to finance concrete adaptation projects and programmes in developing country Parties to the Kyoto Protocol that are particularly vulnerable to the adverse effects of climate change.”1 The Adaptation Fund is financed from a share of proceeds from the CDM and from other sources of funding.


There are many challenges to effective adaptation policy. These include: (1) cross-scale integration of decision making; (2) removal of legal and institutional barriers at higher levels of governance that may inhibit policy decisions at lower levels of governance; (3) unfunded mandates, lack of clarity about authority, and lack of mechanisms for cross-scale and cross-sector coordination and collaboration; (4) effective linking of science and decision making across levels; (5) identification of efficiencies, co-benefits and potential negative feedbacks among adaptation options and between mitigation and adaptation efforts in various sectors and across levels; and (6) the monitoring and evaluation of implementation of policies occurring (and depending on actions) at multiple levels (e.g., Adger et al., 2009b). The Adapting panel report (NRC, 2010a) discusses many of these issues in detail.

RESEARCH CHALLENGES ASSOCIATED WITH POLICY DESIGN AND IMPLEMENTATION

The need for future climate policies that are broader in scope, more flexible, and more ambitious than current policies will also require that policy makers employ iterative decision making and adaptive risk management (see Box 3.1). This poses new and expanded research challenges. Among the most important are (1) monitoring compliance with treaties, (2) assessing the benefits and costs of climate targets, and (3) examining complex and interacting policies.

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×
Monitoring Compliance with Treaties Intended to Reduce Climate Change

Research has shown that improving the effectiveness of international agreements will require a variety of mechanisms to verify compliance (Mitchell, 2003; Winkler, 2008; see also Chapter 16). Scholarship in this area has pointed out many of the constraints to monitoring and implementation, including establishing baselines, measuring GHGs, documenting additionality (that is, what countries and other actors are doing in addition to what would have been implemented in the absence of climate agreements) and “leakage” (emissions reductions in areas with strong policies being offset by increases in areas with weaker policies; Laurance, 2007; Santilli et al., 2005). Substantial improvements in technical capabilities will be required to meet these needs.


Numerous methods for performing more direct GHG measurements exist or have been proposed. For example, CO2 could be measured directly at large concentrated sources, to supplement indirect measurements calculated from fuel inputs (Ackerman and Sundquist, 2008). An expanded network of ground-based, tall-tower, aircraft and satellite measurements of atmospheric CO2 (including its isotopic signature) could be combined with atmospheric circulation models to infer regional anthropogenic CO2 signals among natural sources and sinks of CO2. In particular, a high-precision, high-resolution satellite system such as the Orbiting Carbon Observatory (which crashed at launch in February 2009) could provide the critical baseline CO2 information against which decadal CO2 trends can be verified following a climate treaty (NRC, 2009h). A recent NRC study (2010k) examined a number of these approaches, including their potential use in treaty monitoring and verification. The technology for monitoring changes in land use has also been an active area of research for decades and continues to grow in sophistication (Asner, 2009; GOFC-GOLD, 2008; Moran, 2009).


Verification of climate treaties will also require enhanced institutional arrangements (Winkler, 2008). At present, most work on reporting GHG emissions and removal due to human activities follows the UNFCCC protocol for activities in four sectors: energy; industrial processes and product use; agriculture, forestry, and other land use; and waste. In the United States, the Environmental Protection Agency (EPA) is responsible for the annual national summary report of GHG emissions and sinks, and the Department of Energy’s Energy Information Administration provides energy statistics in greater detail. The EPA also recently issued a Mandatory Reporting of Greenhouse Gases Rule (EPA, 2009b), which sets up procedures for reporting from large sources and suppliers in the United States. Monitoring GHG concentrations is primarily the responsibility of NOAA, as part of the Global Atmosphere Watch of the World Meteorological Organization (WMO, 2009a).

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

The defense, intelligence, and diplomatic communities have considerable experience with designing both technology and institutional arrangements to effectively monitor treaty compliance, and in particular to deploy remote sensing for fine-scale local observations. Expanded engagement of these communities might substantially advance the pace at which the science of monitoring and institutional design evolves and thus provides enhanced support for decision making around international treaties. National and international law enforcement agencies as well as traditional treaty enforcement institutions may also need to be involved since most proposed policies have the potential for fraud and falsification (Gibbs et al., 2009; INECE, 2009; Yang, 2006). As in prior national security agreements, effective verification mechanisms may require surmounting discomfort, in the United States as elsewhere, over provisions allowing access for international inspectors.


Finally, establishing standards and certification mechanisms will be extremely important to reduce emissions. Standards and certification are sets of rules and procedures that are intended to ensure that sellers of credits are following steps that ensure that carbon is actually being sequestered and thus are closely related to monitoring. Proposals are appearing in the literature on how to develop and implement such standards (Oldenburg et al., 2009). These could be informed by the existing literature on how standards and certifications are used to shape the use of technology, including how such standards are negotiated, implemented, and enforced with varying degrees of effectiveness (Bingen and Busch, 2006; Eden, 2009; Hatanaka et al., 2005). These issues are also closely connected with the discussion of monitoring and observation discussed above.

Assessing the Costs and Benefits of Climate Targets

One of the most critical issues in policy design is comparing and assessing different trajectories to achieve GHG emissions reductions and evaluating the consequences and implications of those trajectories for human and environmental systems. A recent NRC study (NRC, 2010j) examined the implications for a range of climate stabilization targets. In contrast, this subsection provides a high-level overview of the social science research needs associated with analytic methods to evaluate targets, focusing on the two major alternative approaches: benefit-cost analysis and cost-effectiveness analysis.


Benefit-cost analysis is a method of systematic evaluation of the total social consequences of any decision or strategy. Applied to climate change, it has been used to assess alternative GHG emissions trajectories, typically by comparing a few simple al-

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

ternative trajectories—each with associated projections of GHG concentrations, global average temperature, climate change impacts, and their valuation—with projections of the cost and effort required to achieve the trajectory relative to some baseline. Benefit-cost analysis requires expressing climate change impacts and lost services in an overall monetary metric so they can be compared to estimates of the costs associated with policies to limit the magnitude of future climate change. Ancillary costs and co-benefits of climate policies, which refer to costs and benefits in other areas (such as changes in local air pollution) resulting from climate policies, are sometimes included in the calculations as well. Such analysis can be conducted for a specific region or nation, or for the world.


Benefit-cost analysis can examine the expected benefits and costs of a particular target or policy or, by looking across targets, can identify an optimum target that maximizes net social benefits. If costs and benefits can be systematically and reliably projected and compared (discussed below are five of the major challenges that must be met to accomplish this objective), the socially optimal level of GHG emissions will be the level where the marginal benefit of reducing GHG emissions further will be equal to the marginal cost of making further GHG emissions reductions. If these calculations can be done credibly, decision makers can use this information to (1) set a limit on GHG emissions, (2) set a price on GHG emissions (whether implemented through market mechanisms or full costing of regulatory programs like emissions standards), and (3) get some sense of how important the climate problem is relative to other major societal problems.


An alternative approach, cost-effectiveness analysis, stipulates some limit on climate change (e.g., a future limit on human-caused radiative forcing or global-average temperature change) as a fixed goal, without evaluating the climate damages associated with the goal, then compares the costs of alternative emissions and policy trajectories to achieve that goal. For example, cost-effectiveness analysis has been used to compare alternative trajectories by which global emissions slow their growth and then decline to meet specified limits on atmospheric CO2 concentration or human-caused radiative forcing in the 22nd century (e.g., starting the decline immediately versus growing for a decade or two and then declining faster [CCSP, 2007c; Richels et al., 2007; van Vuuren et al., 2006; Wigley et al., 1996]). A variant of cost-effectiveness analysis that has been used for climate change, called “safe landing” or “tolerable windows” analysis, defines two such constraints, one on the amount (and sometimes the rate) of climate change and another on the maximum rate of global emissions reduction. It then examines the cost and feasibility of alternative trajectories that stay within those boundaries (Füssel et al., 2003).

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

Cost-effectiveness approaches are often used when the costs and benefits of some action differ greatly in character, and the benefits are subject to greater uncertainty or controversy. In this circumstance, cost-effectiveness analysis allows analytically based comparisons of decisions without requiring that all impacts—in this case, damages from climate change and costs of emissions reduction—be reduced to a single metric. However, the implicit value this imputes to GHG emissions reductions is still equal to the marginal cost of GHG emission reductions that results from hitting the target or staying within the tolerable window. Of course, this implicit value can then be used to adjust the target if that value is felt to be lower or higher than the aggregated marginal value of the climate change impacts avoided. Such an iterative approach to GHG target setting allows multiple metrics to be used in evaluating the impacts of climate changes without completely abandoning the discipline provided by the strict application of cost-benefit analysis.


Formal policy-analytic methods such as benefit-cost and cost-effectiveness analysis can be powerful tools for informing decisions and illuminating structural issues underlying them and have had significant influence in climate policy debates. However, in practice, several major challenges must be met to provide reliable guidance to policy (e.g., Adler and Posner, 2006; Atkinson and Mourato, 2008; Dietz, 1994; Graves, 2007). The modeling community has made significant progress in addressing each of these challenges (see references within each section), but further progress in each area would greatly improve the usefulness of the results produced.


Five challenges are particularly difficult and influential in contributing to differences in cost-benefit valuations between alternative studies. These challenges, discussed in the paragraphs below, have to do with being able to systematically and comprehensively evaluate the benefits of GHG emissions reductions, being able to consistently and comprehensively project the costs of GHG emissions reductions, or being able to compare costs and benefits over time, under uncertainty, and across different socioeconomic groups.

  1. Estimating the social value of goods and services, particularly for impacts on ecosystems, climate-related amenities, or other resources and values for which market prices do not exist. If formal policy-analytic methods are to be used to inform the choice of climate targets, rather than merely the choice of alternative means to meet a specified target, then all consequences of climate change and of efforts to limit it must be made comparable and valued. Economic theory argues that prices in well-functioning markets reflect the full social value of the goods and services that are exchanged, so market prices can be used to value changes in those goods caused by climate change. For impact sectors where markets exist like agriculture, this allows structural models

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

calibrated with market data to be used to value changes in activity levels that result from climate change. However, many important things that will be affected by climate change, such as environmental amenities, ecosystem services, and human health effects, are not exchanged in markets and so have no market price to provide guidance on their social valuation. This problem is pervasive in many areas of environmental assessment, and various methods, including contingent valuation and hedonic pricing approaches, have been developed to infer people’s valuations for nonmarketed goods from their choices in related markets or suitably disciplined surveys (Arrow et al., 1993; Atkinson and Mourato, 2008; Carson, 1997; Mendelsohn and Olmstead, 2009). However, the range of estimates from the various studies is large and there is no consensus on the best approaches.

  1. Valuing uncertain outcomes, particularly high-consequence events whose probability is believed (but not known) to be low at low levels of warming, but increases with greater climate forcing, often called the problem of “fat tails.” Outcomes like these could plausibly result from dramatic irreversibilities in the climate or climate-impacted systems (e.g., a large ice sheet like Greenland melts very rapidly, increasing sea levels and reducing the reflection of sunlight from it, or large amounts of GHGs are released from warming permafrost). In principle, uncertain outcomes can be given a probability weight so that more likely outcomes are given greater weight and less likely—but much worse—outcomes are given lesser weight. “Fat tails” then generally refers to the case where the probability of very-high-consequence outcomes is still high enough that the product of that probability times the valuation of climate damages that would result from that outcome is large (i.e., does not approach zero because the probability of the outcome goes to zero more slowly than the impact valuation of that outcome increases). At present, it is difficult to estimate the probabilities of uncertain climate outcomes, but when these uncertainties are included in an analysis, the results can be very sensitive to assumptions that are made about the probability distribution associated with these low-probability/high-consequence events, and result in quite different conclusions (Nordhaus, 2009; Stern, 2007; Weitzman, 2007b, 2009; Yohe and Tol, 2007). Equally or more important here can be assessing how people perceive and act on the different risks that they face.

  2. Comparing costs, damages, and impacts in the near and long term (setting a social discount rate). The rationale for discounting future costs and benefits (i.e., assigning them a lower value than immediate ones) has been discussed for more than 80 years (see Portney and Weyant [1999] for an overview). Discounting has both an ethical and a scientific component, and when these are correctly distinguished, the case for some form of discounting is compelling (Arrow et al., 2004; Heal, 1997; Nordhaus, 2008; Weitzman, 2007a). There are substantial disagreements, however, over the appropriate functional

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

form and quantitative magnitude of discount factors, and whether it is appropriate to apply the same approach to monetary costs and environmental damages (Atkinson and Mourato, 2008; Dasgupta and Ramsey, 2008; Dietz and Stern, 2008; Graves, 2007; Heal, 2009; Yohe, 2006). In addition, since many of the people who will be affected by climate change the most have not yet been born, an equitable way of factoring their preferences, which cannot be directly measured, into the calculations needs to be developed (Portney and Weyant, 1999).

Because many costs of reducing climate change occur in the near term while the most serious of the climate impacts avoided would be further in the future, socially optimal levels of climate change limitation in a benefit-cost framework can be quite sensitive to choices about discounting; lower discount rates usually imply stronger and earlier action to limit climate change than higher discount rates.

  1. Estimating how policy will influence technological change. It is possible that technological innovation will create opportunities to reduce GHG emissions at lower than present costs, but the rate of such innovation and the relative influence and mechanisms of various possible ways to stimulate it are subject to substantial uncertainties. Alternative models of induced technological change highlight the influence of policies to raise the effective price of emissions, learning-by-doing, public versus private investments in research and development structured in various ways, basic science versus specifically targeted research, and overall investment driven by aggregate economic growth. These alternative models can imply substantial differences in preferred policies, but available data appear to not discriminate strongly between them (Goulder, 2004; Grübler, et al., 2002).

  2. Incorporating equity considerations into the analysis. The costs and benefits of climate change adaptation and limitation will be unevenly distributed across space, time, and social and economic groups. There will be substantial differences across regions within the United States and across the globe (USGCRP, 2009a; World Bank, 2009). Although costs and benefits could in principle be weighted to incorporate equity concerns (Atkinson and Mourato, 2008; Kverndokk and Rose, 2008), in practice this poses significant challenges of observing and projecting disaggregated costs and benefits and, if aggregation is required, identifying defensible equity-based weights. Moreover, formal analyses of climate change responses have examined only aggregate effects at the level of the jurisdiction considered. International aggregations of climate change impacts are often valued in terms of losses in income, which tends to bias the weighting toward richer and away from poorer people who have less to lose but will feel percentage losses in income more.

    That there are significant research challenges that remain regarding the major ele-

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

ments of cost-benefit analysis as currently applied to climate change policy evaluation means that great care needs to be exercised in communicating the results of these calculations to decision makers. Consumers of these studies need to know what factors are included in the analysis and how, and which ones are left out or only partially represented. They can then add their own assessments of the missing elements and perspectives to the numbers they get from the cost-benefit calculations in order to provide a more complete picture of the value of different policy alternatives. At the same time, the raw numbers themselves, if interpreted correctly, can often help decision makers set bounds on appropriate actions, especially if we are far away from the optimum.

Examining Complex and Interacting Policies

While many policy analyses, such as benefit-cost, assume rather generic policy instruments (e.g., a single tax on GHG emissions or a single cap-and-trade policy that applies to all fossil fuel consumption in the nation uniformly), actual policies are much more complex. They also interact with other climate and nonclimate policies at different scales and jurisdictions and their institutional design and implementation critically shapes their effectiveness (Young, 2002a). Previous National Research Council reports and the international community have detailed the research agenda in this area (see in particular Biermann et al., 2009b; NRC, 2005a, 2008h).


Three key topics emerge from these analyses and our own assessment of the challenges faced by policy analysis in supporting climate change decision making: introducing realistic complexity into analyses of climate policy, coordinating across levels of government, and equity and distributional issues. These topics are explored in the paragraphs that follow.

Introducing Realistic Complexity into Analyses of Climate Policy

In the United States as of December 2009, 32 states and the District of Columbia had adopted mandatory standards that, over the next 10 to 20 years, will require that between about 10 and 15 percent2 of the energy supplied by utilities come from alternative and renewable sources (Pew Center on Global Climate Change, 2009). Four other states have voluntary standards. State and local governments as well as the federal government have a variety of programs, including labeling, appliance standards, and

2

 States vary in how the standards are defined so comparisons of goals can only be approximate.

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

investment in technology development and adoption, that are intended to promote energy efficiency (North Carolina State University, 2010). It is not completely clear how existing policies will be affected by, or will affect, future ones, especially across governance scales. If policy analysis is to inform policy decisions, then it has to find ways to understand and model these complex interactions (Selin and VanDeveer, 2007).


These interactions can have substantial influence on the effectiveness of polices. As the IPCC has concluded, programs intended to inform and influence behavior can multiply the effects of other policies. For example, home weatherization programs offering identical financial incentives differed in impact by more than an order of magnitude, depending on how they were implemented (Stern et al., 1986). Legislation and regulations also involve political compromises that add complexity and cause actual policies to deviate from their original goals (Pressman and Widalvsky, 1973). Moreover, domestic climate policies could enhance or retard the U.S. balance of trade depending on how they are structured (Houser et al., 2008).


Nor are these interactions restricted to the U.S. context. International climate policy will interact with many other international agreements and laws. For example, trade agreements may either contradict or complement mechanisms for enforcing emissions limitations (Weber and Peters, 2009). Efforts to encourage transfer of technologies to reduce emissions may be facilitated or inhibited by intellectual property agreements (Brewer, 2008). Development funding can enhance or retard efforts to reduce and adapt to climate change (Klein et al., 2007; World Bank, 2009). A substantial literature has identified the possibility of these complex interactions, but their implications are only just beginning to be explored in depth. There may be advantages to such complex policies, if they can be designed taking into account both political reality and the implications of the complexity involved—complexity that may lead to more robust policy (Anderies et al., 2004; Andersson and Ostrom, 2008; Ostrom, 2007; Pinto and De Oliveira, 2008). Interactions can be also positive as policy instruments try to reap co-benefits across policy goals. A few mechanisms, such as the CDM and the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, seek to reap co-benefits both across mitigation and adaptation and across climate policy and development. For example, the CDM allows Kyoto Annex 1 countries to offset their carbon emissions by generating carbon credits (through the creation and implementation of projects) in Annex 2 countries. Besides generating carbon credits, CDMs are also required to produce a “development dividend” by creating jobs, promoting sustainable development, and other methods (the definition of what constitutes sustainable development requirements varies substantially across countries). However, empirical research has found that suc-

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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cess in promoting sustainable development has been mixed (Olsen, 2007; Pearson, 2007; Sutter and Parreño, 2007).

Coordinating Across Levels of Government

Many levels of government are already engaged in adapting to and limiting the magnitude of climate change (Betsill and Bulkeley, 2006; Betstill and Rabe, 2009; Paterson, 2009; Rabe, 2008; Schreurs, 2008; Selin and VanDeveer, 2007). Public-private partnerships and public-social partnerships (between business and communities) add to the complexity of emerging policy (Lemos and Agrawal, 2006). This complexity raises important questions about the legitimacy of climate policy, including the scope and means of representation of stakeholder interests (Falkner, 2003; Ford, 2003). It also raises questions about the distribution of resources, and about how negative externalities from the policies can be avoided or corrected (Bäckstrand, 2006; Cashore, 2002; Lemos and Agrawal, 2006).


The multilevel governance system of climate policy presents both opportunities and challenges for policy makers. The federal government can learn from and build on policy “experiments” enacted at the state level and capitalize on existing networks to expand political coalitions (Peterson and Rose, 2006). However, the capacity of decision makers operating at any one level can be enhanced or (more frequently) constrained by the policies at other levels (Adger et al., 2007; Betsill and Bulkeley, 2006; Moser, 2009b). The appropriate mode of governing depends on the character of the problem and available resources (including knowledge), the dynamics of the sector involved, the availability of policy options for other policy actors, and the constellation of political interests around a policy (Dietz and Henry, 2008; Dietz et al., 2003; Ostrom, 2005, 2007; Selin and VanDeveer, 2007).


Recent literature also suggests that polycentric policy (i.e., policy that does not originate from and is not implemented in just one, central decision-making unit but is carried out by multiple, linked centers of authority) may be more robust and adaptable than policies implemented by a single unit of government (Andersson and Ostrom, 2008; Ostrom, 2007, 2010; Pinto and De Oliveira, 2008).


In the case of adaptation policy, the implications of multilevel, hybrid forms and polycentric governance both domestically and internationally are many and varied. Processes at the global and national levels will influence local adaptation decisions and vice versa; in the United States and around the world, a great variety of actors and institutions including local, regional, state, federal, and tribal authorities will influence those decisions (e.g., Agrawal, 2008; Armitage et al., 2007; Bulkeley, 2005; Cash et al.,

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
×

2006b; Moser, 2009b; Rabe, 2008; Urwin and Jordan, 2008). For example, in less developed regions, adaptation policy critically intersects with development and decentralization of government authority (Agrawala, 2004; Burton et al., 2007; Eakin and Lemos, 2006; Klein et al., 2007; Kok et al., 2008; World Bank, 2009).

Equity and Distributional Issues

Climate change is a quintessential equity problem since those who have been historically least responsible for causing it will be disproportionally negatively affected by it (Adger et al., 2006; Baer et al., 2000; O’Brien and Leichenko, 2003; Roberts and Parks, 2007; World Bank, 2009). There are usually three main sources of inequality shaping climate policy dialogues: historical responsibility for the problem, who will likely bear the brunt of its negative impacts, and who will be responsible to solve it (O’Brien and Leichenko, 2003; Parks and Roberts, 2010). In addition, other distributional and equity factors need to be considered in the design of adaptation policy. For example, many of those most severely affected by climate change are often those least able to engage effectively in policy decision-making processes. Many policies have the potential for indirect or secondary impacts that may be inequitably distributed (Kates, 2000).


While a rich literature explores different equity aspects of climate change as a problem, including exploring the three aspects of inequality mentioned above in greater detail (e.g., Dow et al., 2006; Roberts and Parks, 2007; Schneider and Lane, 2006; World Bank, 2009), there has been less empirical research carried out about specific ways in which equity issues have or can shape policy design and implementation, especially from the point of view of developing countries, who have pointed out global inequality as a main impediment for international cooperation (Parks and Roberts, 2010).


With regard to adaptation policy in less-developed regions, equity and distribution of costs and benefits of climate change is intrinsically related to the structural inequality and multiplicity of stressors that shape vulnerability to climate impact including poverty, lack of education and access to health care, and war and conflict (see Chapters 11 and 16). Equity issues will also greatly drive political debates in the domestic climate policy context (see Limiting the Magnitude of Future Climate Change [NRC, 2010c]). For example, the fear of job losses is already prevalent in fossil fuel-dependent industries and regions of the United States (Peterson and Rose, 2006). Policies that place a price on carbon will affect various industries and regions of the country differently and will differentially affect socioeconomic groups within regions (Oladosu and Rose, 2007).

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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RESEARCH NEEDS

As scientific knowledge and public awareness about the potential consequences of climate change have grown, the nation and the world have moved from trying to decide whether or not to have climate policy to trying to decide what policies will most effectively limit the magnitude of future climate change and help populations and their infrastructure adapt to its impacts. Scientific analysis can inform this discussion by elucidating the factors that influence the adoption, implementation, and effectiveness of both domestic and international agreements. This research includes improving methods for quantifying and comparing benefits, costs, and risks associated with climate change and climate policies; developing methods for analyzing complex policies and combinations of policies; learning how to design policies that work at multiple levels of governance; and examining climate policies in a broad context, including overall sustainability goals, concerns with equity, and relationships with an array of nonclimate policies. The challenges are substantial but so are the opportunities for both advancing science and gaining scientific knowledge that contributes to effective policy making. Some specific research needs include the following.


Continue to improve understanding of what leads to the adoption and implementation of international agreements on climate and other environmental issues and on what forms of these agreements are most effective at achieving their goals. Given the current state of our understanding of international agreements on climate and sustainability, the International Human Dimensions Programme (Biermann et al., 2009a, 2010), previous NRC reports (NRC, 2005a), and others (Young et al., 2008) have considered research needs. Drawing on these, we identify five key research questions in this area:

  • How do multiple international agreements interact with each other and with public and private policies at the national, regional, and local levels?

  • How are international agreements and their implementation influenced by and how do they influence nongovernmental actors, such as private firms and nongovernmental organizations?

  • How can international agreements utilize an adaptive risk-management approach to responding to climate change?

  • How can accountability and legitimacy of international agreements and the mechanisms that implement them be ensured?

  • How can international agreements best take account of fairness and equity concerns?

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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Develop protocols, institutions, and technologies for monitoring and verifying compliance with international agreements. In addition to research on international agreements, decisions about participating in such agreements need to be made with full awareness of the institutional and technological capabilities for monitoring and verifying that participants to the agreement are fulfilling their commitments, and for informing future policy changes or refinements in an adaptive risk-management framework. Observations of GHG emissions and concentrations are an especially pressing need and are the subject of a recent NRC study (see NRC, 2010k). A system of observations and measurements designed to support international agreements or financial transactions (for example, a cap-and-trade system for carbon emissions) will likely have to meet a higher level of scrutiny than systems used purely for scientific research. In particular, systems to support treaty compliance need to pay special attention to data surety, authentication, reliability, accuracy, and transparency. For use in verification, GHG measurements must be accurate and have sufficient spatial and temporal coverage to distinguish human emissions from natural background variations. An additional and related concern relates to the need to monitor what different actors, including states and private organizations, are doing and how it interplays and affects overall policy goals. For example, a single country or even a private organization may attempt to implement large-scale solar radiation management (see Chapter 15). Observing systems designed to monitor and verify treaty compliance could also be used to monitor and support evaluations of the direct impacts and unintended consequences of such approaches. Better measurements will need to be integrated with a better understanding of how standards and certification can be used effectively to encourage compliance. Research is also needed on the links among measurements, effective enforcement strategies, and standards and certification.


Continue to improve methods for estimating costs, benefits, and cost effectiveness. Research on valuation is advancing in part through improved methodologies for eliciting stated preferences, especially through methods that draw on approaches from decision sciences (such as making valuation a problem for public deliberation) and in part by the accumulation of more valuation studies that make integration and cross-study comparisons (or meta-analyses) feasible. Finding appropriate discount rates and identifying appropriate ways to handle equity effects of climate policies are in part public choices, but a program of scientific analysis can both identify better ways to handle these issues in benefit-cost and cost-effectiveness analyses and develop tools for better assessing the appropriate values to use, including valid and reliable methods of eliciting preferences. Better characterization of uncertainty across all aspects of climate change science and better integration of uncertainty into analytical tools are also extremely important for improving policy design. Finally, better

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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understanding and modeling of technological innovation could lead to more realistic estimation of costs.


Develop methods for analyzing complex, hybrid policies. Real policies include many complexities that address the needs and concerns of diverse sectors, regions, and interests. As a result, nearly all policies are hybrids that involve some elements of regulation and standards, some aspect of market incentives, and some degree of voluntary action on the part of individuals, firms, governments, and communities. Most existing policy analysis tools, such as benefit-cost analysis, were developed to examine simple policies that use a single modality to influence behavior, what might be termed an “ideal type” or “pure form” policy. However, in reality, many policies are complex. To provide useful analysis to decision makers shaping policy, scientists need to analyze the costs, benefits, and risks associated with complex hybrid forms of policy, which can sometimes be done with extensions of existing quantitative tools but may often require new, more advanced tools. Chapter 4 of the report discusses some of the tools currently available and under development that can be applied to this task.


Further understanding of how institutions interact in the context of multilevel governance and adaptive management. Recent research suggests that polycentric approaches to policy may be well suited to adaptive risk management. However, the interaction of multiple policies with multiple goals and approaches to affecting change, adopted and implemented in multiple contexts, can also lead to less-than-ideal results, and even situations where the outcome is wholly ineffective or even harmful. For example, policies that will change or affect water resource distributions across a multistate watershed (such as the Colorado River) will require enormous coordination among the affected states but will also have important implications for different water-dependent sectors (including agriculture, energy, flood management, industry and urban water users, and ecosystem managers) within any one state. Research is needed to characterize how policies interact across scales and intentions and to diagnose forms of policies that are most and least effective when implemented in the context of other policies. In addition, the problem of effectively linking scientific analysis to public deliberation becomes much more complex when there are multiple stakeholder groups involved, and especially when some of them reflect primarily local interests and perspectives while others are national or even global interests and perspectives (NRC, 2008h).


Develop analytical approaches that examine and evaluate climate policy taking into account its full range of effects including those on human well-being and ecosystems integrity, unintended consequences and equity effects. Policies rarely if ever do only one thing and rarely if ever affect everyone equally. Climate policy

Suggested Citation:"17 Designing, Implementing, and Evaluating Climate Policies." National Research Council. 2010. Advancing the Science of Climate Change. Washington, DC: The National Academies Press. doi: 10.17226/12782.
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must be considered in the larger context of sustainable development (e.g., World Bank, 2009), and doing so will require assessment of the full range of effects of climate policy on human well-being and ecosystem health. Also needed are better metrics for comparing different outcomes, as noted above, and especially because regions, sectors, regions, local communities, and even different groups within communities will be differentially vulnerable to climate change and efforts to limit and adapt to it (see Chapter 16). It is also important to consider equity across social groups and time, so that current efforts to limit or adapt to climate change do not have major negative effects on human well-being and ecosystem health in several decades or centuries. Since equity effects are major elements in both the domestic and international debates about climate policy, a sounder understanding of these issues would aid in both the design of policy and in moving toward adoption and implementation.

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Climate change is occurring, is caused largely by human activities, and poses significant risks for--and in many cases is already affecting--a broad range of human and natural systems. The compelling case for these conclusions is provided in Advancing the Science of Climate Change, part of a congressionally requested suite of studies known as America's Climate Choices. While noting that there is always more to learn and that the scientific process is never closed, the book shows that hypotheses about climate change are supported by multiple lines of evidence and have stood firm in the face of serious debate and careful evaluation of alternative explanations.

As decision makers respond to these risks, the nation's scientific enterprise can contribute through research that improves understanding of the causes and consequences of climate change and also is useful to decision makers at the local, regional, national, and international levels. The book identifies decisions being made in 12 sectors, ranging from agriculture to transportation, to identify decisions being made in response to climate change.

Advancing the Science of Climate Change calls for a single federal entity or program to coordinate a national, multidisciplinary research effort aimed at improving both understanding and responses to climate change. Seven cross-cutting research themes are identified to support this scientific enterprise. In addition, leaders of federal climate research should redouble efforts to deploy a comprehensive climate observing system, improve climate models and other analytical tools, invest in human capital, and improve linkages between research and decisions by forming partnerships with action-oriented programs.

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