ZEW Panel Discussion on the Winners and Losers of Climate Policy at COP21 Climate Summit in Paris

A new climate agreement is being hotly debated at the UN Climate Summit (COP21) in Paris. This conference involves over 40,000 participants, including high-level negotiators, policy-makers, representatives of civil society, and researchers. During COP21, ZEW and the German Federal Ministry of Education and Research (BMBF) jointly hosted a panel discussion with participants from the spheres of research and politics, moderated by ZEW economist Dr. Katrin Sommerfeld and opened by Professor René Haak from the BMBF. The well-attended panel discussed the question: Who are the losers and who are the winners of climate policy measures?

Climate policies have significant repercussions for the economy with notable implications for the optimal design of policies. While environmental policies may negatively impact economic competitiveness and employment, they can also inspire environmental innovations and thus have a positive effect on the economy. The panel at COP21 was aimed at discussing the link between climate policies, competitiveness and innovation with a focus on Germany – a global pioneer in clean technologies and climate policies.

Climate Policy Measures Without Impact

During the discussion, Dr. Oliver Schenker, acting head of ZEW’s Research Department "Environmental and Resource Economics, Environmental Management“, argued that climate policy measures need to provide sufficient “bang for the buck”. It is therefore key to understand how the costs and benefits of a policy are distributed. In light of current research results, showing that the European Emissions Trading Scheme (EU ETS) had almost no measurable impact on competitiveness, he believes that the discussion on competitiveness will shift from being used as an argument against climate policy per se to one about smart and effective policies.

While most empirical studies have found that carbon prices do cause abatement, they have not shown any measurable competitiveness impacts, explained Dr. Florens Flues from the Organisation for Economic Co-operation and Development (OECD). Although carbon pricing has, on the whole, no detrimental effect on competitiveness, given the current design and level of carbon prices, more disaggregated research, e.g. on firm- or sector-level, is nonetheless needed. Ingmar Jürgens from the European Commission’s Representation in Germany argued in a similar way, pointing out that provisions for carbon leakage have been extremely effective in marrying ambitious climate policy with successful industrial policy. Yet there is still need for more empirical ex-post analysis, according to Jürgens.

From a different angle, Professor Joachim Schleich from the Gernoble École de Management and Fraunhofer Institute of Systems and Innovation Research (ISI) gave a brief overview of the effects of climate policies on innovation. He argued that innovations are indispensable in order to create jobs and export potentials from climate policies. But in a globalised world, he added, national benefits may be transitory in nature only.

No Losers but also no Winners Identified

Negative light has often been cast upon climate policy measures, accusing them to negatively influence competition and innovation activity. The panel opened an interesting discussion both for the panelists and the audience on current research findings over this matter. While research has yielded some interesting results pointing towards zero economic effects of climate policies, further research is needed. More light could be shed on the employment effects of climate policy, for example, as well as on the channels through which potential effects might operate. Consequently, it is all the more important to foster research on these topics, while policy-makers should not hesitate to push ambitious climate policy measures forward.

ZEW’s Research Department "Environmental and Resource Economics, Environmental Management“ has conducted various analyses on the topics discussed at the COP21 side event and will continue this work in the future. Research results include publications such as The Road to Paris: Towards a Fair and Effective Climate Agreement?, ZEW policy brief No. 15-05, and The Effect of Electricity Taxation on the German Manufacturing Sector: A Regression Discontinuity Approach, ZEW Discussion Paper No. 15-013, as well as the project "Integrated Assessment of a Green Transformation: An Assessment of Economic, Social, and Technological Transformation Pathways" (InTrans).

Contact

Dr. Katrin Sommerfeld, Phone +49 (0)621 1235-216, E-mail: sommerfeld@zew.de