Political economy of climate change decision-making

National policy-makers have been enacting climate-related laws and policies with increasing frequency. Even prior to Paris, a near-global assessment of climate change laws and policies in 2015 found that 804 existed, nearly double the number in 2009. More importantly, at least 58 countries have enacted framework legislation that addresses both emissions mitigation and adaptation (Nachmany et al., 2015). This means it is critical to understand the political economic power structures, relationships and incentives of different domestic actors and institutions.

Political Economy Analysis has gained renewed prominence in recent years among bilateral and multilateral organisations, as a way to better understand how political narratives, economic incentives, informal rules and relationships shape the distribution and contestation of power and resources between individuals and groups (Mcloughlin, 2014). Tanner and Allouche (2011) have argued that political economy approaches to climate change are critical because of:

  • The added complexity of interests and actors resulting from the issue’s cross-sectoral nature;
  • An historical bias towards global approaches that may not be sufficiently flexible for national or subnational conditions;
  • Problems of rent-seeking that are likely to accompany the increase in climate finance and resource transfer; and
  • An overreliance on an apolitical understanding of the policy process and solutions framed through a technical or managerial lens.

Advocates of ‘politically smart, locally led’ development have argued that ‘best practice’ approaches should be abandoned in favour of ‘best fit’ options that are selected by local actors, whom donors enable to experiment with solutions that are technically sound and politically feasible (Booth & Unsworth, 2014; Faustino & Booth, 2014; Fritz et al., 2014; Rocha Menocal, 2014). This is closely related to the concept of problem-driven iterative adaptation (see Box 1).

Box 1: Problem-driven iterative adaptation

PDIA is an approach developed by Andrews et al. (2013) to improve the performance of development outcomes by developing ‘best fit’ solutions through iterative experimentation with local partners. The authors criticise policy reform approaches oriented around best practices that are ‘unlikely to fit particular developing country contexts’ and that create ‘capability traps’ whereby ‘governments constantly adopt “reforms” as signals to ensure ongoing flows of external financing and legitimacy yet never actually improve’ (Andrews et al., 2013: 235). At the heart of the authors’ critique is the idea that governance interventions have wasted resources prioritising ‘form over function’ ‒ that laws, procedures and rules have changed while function (e.g. public service delivery) has not. The authors present PDIA as a synthesis of multidisciplinary and multi-sectoral scholarship and practice that aims to:

  • Solve particular problems in local contexts, as nominated and prioritised by local actors;
  • Create an authorising environment for decision-making that allows for positive deviation and experimentation;
  • Involve active, ongoing, and experiential learning and iterative feedback of lessons into new solutions; and
  • Engage broad sets of agents to ensure reforms are viable and relevant (i.e. have political support and can be implemented) (Andrews et al., 2013).

Elements of this approach have can be seen in adaptive collaborative management, which has been employed over the past few decades in various settings ‒ particularly in forested communities ‒ as a way of enabling iterative learning and building informal institutions for more effective collaboration between governments and communities (CIFOR, 2008). Still, the lessons may be an important reminder, especially as governments and international processes may feel pressure or be presented with incentives to rapidly develop and implement climate policies without fully assessing implementation challenges.

These lessons are relevant for climate policy implementation: low-carbon development will not take off at the pace required unless domestic political support and adaptation needs are closely linked to development priorities. Some of the regions that are the most exposed to climate change, and that also have the most vulnerable populations, are in sub-Saharan African countries. Cammack (2007) has described many of these as following a ‘patrimonial logic’, whereby political allegiances, informal rules and personal relationships determine access to power and resources. While much has been written about these approaches with regard to development generally and public service delivery specifically, there has been less attention to these approaches in the climate policy and governance literature (Lockwood, 2013). However, experience on adaptation planning dovetails with the importance of finding ‘best fit’ solutions that are flexible and adaptive to local contexts. ‘Robust’ decision-making requires an understanding that decisions should avoid locking in potentially harmful, or ‘maladaptive’, investments in infrastructure that may exacerbate vulnerabilities and be costly to undo. There is still a knowledge gap on how to best operationalise these concepts in a way that is ‘politically smart’ ‒ in this case by understanding where resources for adaptation are controlled and whose interests different policy choices may affect.

Box 2: Summary of differences between mitigation and adaptation

Responses to the climate change crisis often distinguish between mitigation ‒ reducing or preventing GHGs and increasing carbon sinks and reservoirs ‒ and adaptation ‒ ‘changes in processes, practices and structures to moderate potential damages or take advantage of opportunities associated with climate change’. From a governance perspective, these are not entirely discrete issues. For instance, low-carbon technologies to expand and secure energy access prevent emissions while also building resilience through sustainable development.

There are common issues of power, rent-seeking/benefit capture and institutional capacity to implement new policies. Developing countries will receive finance to address both issues, though the finance has historically been heavily weighted towards mitigation. Within adaptation, there are lively debates over how to balance ‘hard’ adaptation solutions (e.g. climate-resilient infrastructure) with ‘soft’ ones (e.g. strengthening redistributive social protection policies or land tenure reforms), and political actors may be incentivised to promote one over the other.

The actors (state and non-state) involved in adaptation and mitigation policy are likely to vary to an extent. Energy ministries are likely to be more involved in mitigation policies, whereas planning agencies figure more prominently in adaptation. Where vulnerabilities are highly localised, subnational governments may play a larger role in adaptation. Finally, the politics of mitigation are often more contentious, as there are often more obvious ‘losers’, particularly when there are politically embedded extractive energy industries.

Sources: Mitigation: unfccc.int/focus/mitigation/items/7169.php; adaptation: unfccc.int/focus/adaptation/items/6999.php

With respect to mitigation in countries with larger per capita emissions, a major cause of this political inertia has been the distributional inequality of the costs and benefits of action over space and time. The opportunity costs of investing in the development and deployment of low-carbon technology and infrastructure will be incurred in the near term, whereas it is future generations who will more fully appreciate an avoided climate catastrophe. High- and upper-middle-income countries responsible for the vast majority of cumulative emissions are less vulnerable to its impacts than lower-income countries of the Global South. (See index.gain.org.) Rather than arguing that others (such as future generations or the poor) should bear the cost, policy-makers in developed economies often defend inaction by appealing to scientific, technical or economic uncertainty.

In democratic countries where lawmakers face re-election every few years, this may be attributed to risk-averse behaviour, or ‘blame avoidance’. However, even in the US, where public opinion has been more divided in much of Europe on policy responses to climate change than, polls have often found support for renewable energy investment and carbon pricing (Stokes et al., 2015). While a 2015 study of 500 climate laws around the world found no difference, on average, in the likelihood of enactment under right- or left-leaning governments, major exceptions include the US, Canada and Australia (Fankhauser et al., 2014). The US has thus far had to rely on executive measures to reduce emissions, which, while significant, are not economy-wide. Canada joined the Kyoto Protocol but then dropped out in 2011 during the Stephen Harper administration. Australia enacted a carbon tax in 2012 only to have it repealed by parliament in 2014. To date, these three major developed nations have found it more difficult to enact climate legislation or create sufficient institutional and political commitment for legislation to stick through challenges by vested interests.

Section 4 provides country examples of how it is possible to create constituencies through the design of climate policies, and how, under the right conditions, these can form multi-stakeholder coalitions that can help create political windows of opportunity.