Aligning climate action with the self-interest and short-term dominated priorities of decision-makers

Abstract

ABSTRACTThe global and long-term nature of climate change conflicts with the self-interest and short-term dominated priorities of decision-makers. Climate change mitigation makes sense at the global level, but not at the level of the individual decision-maker. This conflict has been and remains the main obstacle to effective global cooperation and mitigation. This paper proposes a framework that aligns climate action with short-term self-interest through results-based payments to governments. Its key components are: determining an emission benchmark for each country as well as a price for carbon saving; paying countries annually for reducing emissions below their respective benchmark; a new international fund to finance these annual payments by borrowing capital from private investors; and repaying borrowings in the long-term through payments made by countries to the fund based on a pre-determined allocation mechanism. This framework would offer important benefits over an approach focused on allocating climate action or a carbon budget among countries. These include the improved prospect of reaching an effective climate agreement and delivering fast and dramatic mitigation thanks to stronger political commitment, the transformation of short-term self-interest from an obstacle into a driver of climate action, and the additional financing created. The paper also proposes a pilot scheme focusing on hydrofluorocarbon emissions with a considerably lower financing requirement. This offers the possibility of an alternative financing mechanism, and thus a faster and more straightforward implementation path. Short-term financial incentives offered to governments could turn policy action from a burden into an opportunity from their perspective unlocking a huge potential for timely mitigation.Key policy insightsA new international framework that offers short-term, results-based payments to governments to promote mitigation action could lead to much more effective global mitigation and international cooperation.The financing of such an approach could be solved through a novel financing structure, backed by the long-term commitments of participating countries and thus aligning the timeframe of the financial costs of mitigation with its climate benefits.The effectiveness of results-based payments and the concept behind this new approach could be proven through a pilot scheme focusing on hydrofluorocarbon emissions.