The political economy of climate policy: a Theoretical Framework

Jan Steckel

Devising policies that facilitate a transition to low-carbon energy systems requires a close understanding of the country-specific political economy of energy and climate policy formulation. In this paper we develop a novel theoretical framework to analyze country-specific experiences and identify entry points that could bring about policy change. It builds on the assumption that those policies are implemented that best meet the objectives of actors that have the greatest influence on policy decisions. It includes three basic elements: i) identifying the societal as well as political actors most relevant for the formulation of energy and climate policies; ii) spelling out these actors’ underlying objectives; iii) assessing the context which determines how certain objectives matter for certain societal actors, how these societal actors influence political actors engaged in formal public policy formation, and how the interplay of different political actors’ interests results in the adoption of energy and climate policies. As it permits to formulate hypotheses regarding the underlying reasons for the implementation of energy and climate policy formulation, the framework is suited well for conducting country-level case studies. We exemplarily apply it to South Africa, Indonesia and Vietnam.

Policy pathways for 2°C-compatible coal transitions in major coal-producing economies: insights from an international research project

Oliver Sartor

Coal transitions are on the horizon. This is driven by a range of both climate-policy and non-climate policy factors. Countries in which coal plays a residual role in the energy mix (or in which shale gas has emerged) are already moving to phase out coal, either by policy choice or with the help of market forces. Nevertheless, countries with significant domestic reserves and coal-dominant energy systems are still a fair way from giving up their dependence.  The issues are more complex in these countries, given the combination of economic, social, fiscal and energy security concerns linked to the coal sector. Progress towards clean energy can be reversed if these issues are not managed in a comprehensive and inclusive way.

In this context, IDDRI and Climate Strategies, launched the project Coal Transitions: Research and Dialogue on the Future of Coal. Coal Transitions has brought together leading energy policy research institutes in six major coal dependent economies – China, India, South Africa, Australia, Germany and Poland – to explore concrete technology and policy pathways to reduce the share of unabated coal in their national energy sector, in line with the 2°C objective of the Paris Agreement. The project teams have focused not only on viable alternative energy choices to coal, but also on how to address essential socio-economic and political considerations that could inhibit their transitions.
 
The paper to be presented at the conference will provide a synthesis of the key lessons and insights from these national-level, context-driven, analyses. While recognizing the strong importance of national context, it will identify key pillars of coal transition pathways that have emerged from the project. It will provide concrete examples of specific policy tools that national experts have identified as essential for the design of a policy package that is most likely to be both effective and fair. Key issues addressed include: stranded assets, stranded workers, improving local economic resilience, managing uncertainty, managing fiscal impacts, and phasing in alternative technologies. Download the summary report of the Coal Transitions project

A Historical Case Study on Coal Transition in Germany

Pao-Yu Oei, Philipp Herpich, Hanna Brauers

Subsidies for German hard coal production will end in 2018, resulting in a final shutdown of domestic hard coal production. This paper looks back at the 60 years of constant decline and transition of an industry that once employed more than 600,000 people. One focus of this historic case study therefore lies on the Ruhr area – Germany´s largest hard coal mining area that was hit by this economically driven transition. This is complemented by the politically driven reduction of lignite production in Eastern Germany due to the reunification in 1990.

The analysis is hereby divided into the quantitative consideration of the significance of coal for the energy system and the regions, and an evaluation of implemented political instruments accompanying the reductions in the coal sector. The political instruments on regional, national and supranational level hereby can be differentiated between measures for the conservation of the coal production, for the economic reorientation in the regions as well as easing the social impact.

Upcoming challenges for regions that face a coal phase-out in the future differ depending on various aspects e.g. kind of coal (lignite or hard coal), its usage (domestic or exported; electricity; heat; industry); regional characteristics (rural or urban); as well as political and institutional surrounding (governance; ownership). This analysis of past transitions of mining areas and energy systems in Germany might, however, provide other countries and regions with valuable lessons of how to structure their upcoming coal phase-out period and therefore provides a useful addition to the existing literature.

South Africa's coal transition: the socio-economic implications of a 2-degree consistent pathway

Tara Caetano, Jesse Burton, Bryce McCall

Sustainable growth and development in South Africa will depend crucially on the transition away from a coal-intensive energy system and economy. While competitive alternatives exist, the transition away from coal and towards these alternatives is limited by techno-institutional lock-in, concerns about economic impacts in existing firms (especially job losses), and the political commitments of the state-owned electricity utility, Eskom. At the same time the coal sector is already facing challenges due to global commodity price reductions, low demand growth domestically, and decreasing competitiveness.

This paper addresses a gap in research examining the effects of stringent mitigation policy on the coal sector in South Africa. In a carbon constrained world there will be limits to both the extraction and use of coal. Understanding the implications of meeting 2 degrees for South Africa raises important questions:  where and when are assets stranded for a 2 degree-consistent pathway? Whose coal is not burned? And what are the implications for labour in fossil fuel extracting sectors?

This study developed a detailed coal supply model for South Africa with the necessary granularity to understand the economic implications of transitioning away from coal. The coal supply model is used to analyse the future supply of coal for electricity in South Africa. This includes the potential avoidance of carbon lock-in for the electricity sector (where can infrastructure still be avoided?), impacts on employment, skills, and retraining (as coal plants are phased out, where are the impacts felt, what is the magnitude on the labour force, and what options exist to cushion these impacts?) as well as macroeconomic implications of coal demand and use. Understanding which firms, workers, and communities are impacted by a coal phaseout, and when, is an important requirement for a socially and environmentally just transition away from coal