In this special feature, we have examined the past, present and future climate policies of China, the EU and the USA (see Bang, Heggelund and Skjærseth). More specifically, we have examined policy mixes for various transition functions towards achieving the PA goals. Technological change is seen as crucial in ‘green growth’ theories for unlocking population/economic growth from resource use and carbon emissions (see Andresen et al., this issue). Moreover, the scale of the changes needed will have consequences for wider socioeconomic systems related to employment, economic growth, and distribution of wealth. All these challenges necessitate broad policy mixes or packages. In the following, we draw on the findings in Bang, Heggelund and Skjærseth (this issue) to compare the policy mixes in China, the EU and the USA that are crucial for net zero emissions (summarized in Table 1).
Before we present the results, we should first note that China, the EU and the USA face different energy and socioeconomic challenges and have extremely different political systems with consequences for climate policy (see Bang, Heggelund and Skjærseth and, this issue). The supranational EU decision-making system is characterized by its capacity to act strategically in climate policy with a long-range perspective. In contrast, the many veto points embedded in the federal US system due to the separation of powers between the three branches of government have resulted in policy instability as political polarization has exacerbated since the 1990s. Conversely, the authoritarian Chinese system, based on one political party and five-year plans, is more directed towards incremental change. China’s energy mix also differs, although fossil fuels dominate for all three actors: fossil-fuel as a share of total energy consumption is 88% for China, 71% for the EU and 83% for the USA (World Bank 2020).
Technology push policies
From a technology perspective, it seems logical to start with public ‘push’ policies adopted to promote research and innovation in energy technologies. Such policies are crucial to the energy transition needed towards achieving ‘well below 2 °C above pre-industrial levels’ (IEA 2020c). The main energy technological options for breaking the emissions trend and meeting the PA targets are to shift the energy mix towards sources emitting less or no CO2; to promote energy saving; and to enable Carbon Capture and Storage (CCS) or equivalent ‘removal and storage’ options.
Mission Innovation, launched at the 2015 Paris Climate conference by 22 countries (including China and the USA) and the EU, aims at doubling public R&D low-carbon energy funding by 2021. Since 2014, global public low-carbon energy research and innovation budgets have increased.Footnote 1This is also reflected in China, the EU and the USAFootnote 2: China’s budgets grew by 10% since 2014, while US and EU budgets grew by 7% (IEA 2020d). However, the EU and the USA are clearly the globally leading regions in publicly funded low-carbon energy research and innovation, each spending about twice as much as China (IEA 2020d).
Concerning organization, EU funding of low-carbon research and innovation increased significantly from 2008 with the EU Strategic Energy Technology Plan (SET-Plan), although it failed to coordinate and concentrate low-carbon technology research and innovation resources at different levels. In contrast, the USA established and has maintained a strong and coordinated federal structure for public support of low-carbon technology innovation since the 1970s. Coordinated efforts across federal government agencies, national laboratories, and universities have resulted in major scientific innovations, addressing large-scale, complex R&D challenges with an emphasis on translating basic science to innovation. Bipartisan support in Congress provides stability to these publicly financed push policies. In 2015, China launched the ten-year strategy ‘Made in China 2025′, aimed at promoting innovation in ten core industries, including the power sector (renewable energy, e.g. solar PV and wind, and new energy vehicles (NEVs) and equipment and batteries. China’s growing renewable energy development is increasingly related to national R&D programmes.
In summary, public low-carbon energy research and innovation funding has increased in all three key actors, but the EU and the USA are the globally leading regions. Coordination of innovation efforts varies from strong in the USA to relatively weak in the EU.
Demand-pull policies such as carbon pricing or support to renewables play a crucial role in the policy mix, together with technology-push instruments for incentivizing the development and deployment of clean energy technology. Such policies will reduce the risks for private investments.
The EU has developed its climate policy from the early 1990s. Since 2007, it has adopted increasingly ambitious climate- and energy targets and binding policies focusing on renewables, energy efficiency and GHG reductions. In December 2020, the European Council agreed on raising the 2030 GHG reduction target from 40 to 55% (reduction and uptake) compared to 1990 levels. EU climate and energy policies have been linked; and climate-policy legislation has been strengthened with the 2005 EU Emissions Trading System based on an absolute annually decreasing cap and with carbon pricing at the core. The EU’s internal energy market has also been reformed to better fit decentralized and variable renewable energy. Since 1990, EU GHG emissions have decreased (also for reasons unrelated to climate policy) by 24% and the share of renewable energy consumption has more than doubled since 2005. In 2018, renewable energy represented 18.9% of the energy consumed in the EU, on route towards the 2020 target of 20%.Footnote 3
US federal climate targets and policies have varied significantly with different presidential administrations, from ambitious attempts at reform under Democratic presidents Clinton and Obama to backlash and status-quo approaches under Republican presidents Bush and Trump. The low durability of federal climate policies has prevented any real federal climate policy effects. Still, in 2018, GHG emissions had been reduced by 10.2% from their peak in 2007 (EPA 2020). A market-driven decrease in the use of coal for power generation underpinned the decline in overall US emissions.Footnote 4 Moreover, cuts in GHG emissions were underpinned by growth in renewable energy use. The consumption of renewable energy reached a record 11% of total U.S. energy consumption in 2019, a doubling since 2005. Renewable energy technologies, particularly solar and wind, were supported over the past two decades by federal legislation and other policy incentives aimed at deployment, such as federal loan guarantees, production tax credits and investment tax credits for commercial and residential projects. Tax credits depend on Congressional approval and were renewed regularly by Congress since first adopted in 1992 (CRS 2020). State-level support varies widely, but most US states have adopted incentive structures in the form of renewable portfolio standards or similar. Moreover, regional and state-level cap-and-trade systems have been implemented in California and in the New England/Mid-Atlantic region.
In China, under the 2007 National Climate Change Programme, energy and climate policies have developed incrementally. In 2018 the authorities reported that carbon intensity had decreased by 45.8% compared with the 2005 level (MEE 2019). However, in the same year, CO2 emissions in China had increased by 3.7 times compared to 1990, reaching 11.3 Gt CO2 and amounting to 28% of global emissions (Crippa et al 2019; Le Quéré et al 2018). Improved energy efficiency and a switch to natural gas in cities contributed to carbon-intensity goals. In 2019, hydro and other renewables sources made up 8% and 5%, respectively, of total energy consumption, while coal accounted for 58%.Footnote 5 Notably, the 12th FYP (2011–2015) introduced a carbon mechanism as a way to address carbon emissions (Heggelund et al 2019). The carbon market was politically launched in 2017 with a two-year test and planning period; real trading is scheduled to begin in 2021 (based on relative emission targets for the power sector). In 2020, China unexpectedly decided to peak emissions before 2030, become carbon–neutral by 2060, and enhanced the Nationally Determined Contribution (NDC) goal to reduce carbon intensity by 65% compared to 2005 (Xinhua 2020b).
Thus, demand-pull policies have become relatively ambitious in the EU, are instable and inefficient at the federal level in the United States and have gradually become more ambitious in China.
Green industrial policies
Policies are also required for ‘green’ growth and jobs aimed at promoting new ‘green’ business opportunities while constraining the support for existing polluting industries. The following section focuses mainly on coal.Footnote 6
In the EU, economic growth has been increasingly linked to sustainability. The European Green Deal is framed as a ‘green-growth’ strategy explicitly aimed at decoupling economic growth from resource use by 2050. EU ‘green’ industries and jobs have increased significantly. Already in 2013, ‘eco’ industry companies had a turnover of more than EUR 700 and were estimated to employ over 4.2 million people.Footnote 7 The 2020 ‘next-generation’ EU recovery plan (below) aims to create at least one million ‘green’ jobs with the Just Transition Fund to help workers in the coal industry into new roles.Footnote 8 If existing coal-fired power plants continue to operate to the end of their life-span, the EU will fail to meet the PA by 2050.Footnote 9 The carbon price has since 2018 influenced a shift away from coal towards renewables and natural gas.Footnote 10 Eight countries, representing 20% of the EU’s total installed coal capacity, have decided to phase out coal by 2030. In Germany, which accounts for about one-third of the EU’s total installed coal capacity, a government commission has agreed phase out coal by 2038.Footnote 11 Even in the least climate-enthusiastic coal-dependent Poland, agreement has been reached between the government and trade unions on phasing out coal mining by 2049.Footnote 12 Although there is no guarantee that this development will continue, things seem to be heading in the right direction.
In the United States, comprehensive and durable federal green industrial policy packages for promoting new ‘green’ business opportunities while constraining the support for existing polluting industries are generally lacking. Federal climate policies introduced by President Obama aimed to reduce emissions from polluting industries, such as regulations targeting coal-fired power plants and methane leaks from shale oil and gas drilling. Obama also intensified public investment strategies for creating new and ‘greener’ jobs. However, these policies were largely rolled back by the Trump administration and replaced with regulatory action aimed at supporting growth in the fossil-fuel industries. Even so, strong demand-pull policies for renewable energy at the state level have encouraged a flourishing ‘green’ industry. Reports estimate that about 1.2% of the US workforce–or about 3.3 million peopleFootnote 13–are working in clean energy industries, outnumbering fossil fuel workers by three to one.Footnote 14 Moreover, the coal industry is dwindling due to market changes. In 2019 coal mining fell to its lowest level since 1978Footnote 15 and the number of coal plant retirements is accelerating.Footnote 16
In China, there is growth in both polluting industries like coal, oil and gas, and in ‘green’ industries. According to figures from IRENA (2020), China is a clear leader in renewable energy employment worldwide: 38% of the world’s total (ibid., p. 22). Renewable energy jobs amounted to appr 4.4 million (IRENA 2020; see Table 1, estimated direct and indirect RE jobs worldwide 2018–19). The PV workforce amounted to 2.2 million jobs, and wind power employment around 518,000 jobs. In 2016, coal mining accounted for some 5 million jobs, out of a workforce of some 800 million, although the sector still supports tens of millions of jobs (Global Commission and IRENA 2019). These figures show that China’s green sector is growing (IEA 2020a).
In conclusion, ‘green’ jobs related to low-carbon energy development are growing in the USA, China and the EU. Concurrently, the coal sector is declining in the EU and the USA, but increasing in China. Only the EU is developing a policy to phase out coal and replace employment in this sector with new ‘green’ jobs.
Policies for distributional effects
When energy and climate policies become more ambitious, transition support and compensatory relief to, e.g. coal regions or poor energy consumers will be necessary to ensure that no one is ‘left behind’. At least in democratic polities, the transition needed to break the emissions trend will fail unless there is sustained public majority support towards 2050 and beyond. Actors clearly differ in their ideas as to what is socially ‘fair’ or ‘just’. We focus on how the topic is approached in China, the EU, and the USA.
The EU’s climate policy has recently placed distributional issues from climate policies among people and regions on the agenda. Distributional concerns have developed, from fairness among member-states and industry sectors, to regions and citizens–note the Yellow vests movement in France. In 2017, the Juncker Commission established the Coal Regions in Transition Platform to facilitate cooperation between affected regions. Several funds have been available to support projects aligned with a just transition: in 2020, it was decided to allocate €17.5 billion to a specific Just Transition Fund. The EU has also started to pay serious attention to energy poverty, establishing a monitoring system to learn more about the problem.Footnote 17
In the United States, the ideas of ‘environmental justice’ and a ‘fair transition’ have only recently emerged as part of the energy transition debate. After pressure from environmental NGOs and the progressive faction of the Democratic Party, a Green New Deal resolution was debated in the House of Representatives in 2019, formally introducing the topics on the US policy agenda. President Biden has included environmental justice and just transition topics in his plans for reforming US climate policy, elevating these concerns to a central place on the policy agenda as adoption and implementation debates begin in 2021. Biden has promised to channel 40% of the funding in his $2 trillion climate policy reform package to environmental justice purposes.Footnote 18
In China, the idea of a just transition has a different meaning, particularly as compared to the EU, as coal is seen as necessary for economic growth and poverty alleviation. Given the uneven development levels throughout the country, interests and priorities between the provinces vary greatly. Coal-producing provinces depend on coal for their economy and employment; other provinces and cities are slowly replacing coal with green-growth industries. Here, the challenge of just transition is likely to emerge if/when emissions are brought towards net-zero in 2060 (see below).
Policies for dealing with distributional issues by enabling a just transition follow the ambitiousness in climate policy. The EU has started to take this seriously by allocating funds, followed by the USA where just transition is an emerging topic. China will have to follow suit in order to attain its own objectives.
Policy implementation and reform
In a long-term perspective, successive policy mixes will be needed in line with the regular ‘stock-taking’ and increases in ambitions every five years as per the PA. Positive or negative policy feedback will flow from implementation experiences via learning to reform of policies. Implementation challenges for the actors will vary with differing levels of ambition and stages in the policy cycle from initiation to decision-making, implementation, and reform.
The EU has completed the first full climate-policy cycle from policies and implementation directed towards 2020 to reform towards 2030. Implementation is challenging as policies are adopted in Brussels for implementation in 27 member-states. Based partly on mixed or positive experiences and policy feedback from implementing EU policies for 2020, the reformed EU targets and policies for 2030 became ‘re-packed’ and generally more ambitious. Most member-states, including Germany and France, have been in the forefront, but some Central and East European states have acted as laggards. The policy mix itself offered room for compromise among the member-states, with compensation and special arrangements for the ‘least-climate-ambitious’ actors, but also aimed at easing the costs for high-income member-states that had to adopt the most ambitious obligations.
In the United States, inherent instability caused by political polarization prevented effective implementation of climate policies. Proposed climate policy reforms, like the 2009 Waxman-Markey climate bill and Obama’s many climate-related executive orders, failed to garner bipartisan support and were blocked or removed once Republicans gained majorities in Congress and occupied the White House. As a result, policy learning and positive feedback largely failed in the climate policy field. In the field of renewable-energy policy, however, there was more bipartisan agreement on policy reforms, enabling policy learning and positive feedback and contributing to technology innovation and deployment, in turn helping to cut carbon emissions.
In China, the local authorities are expected to implement the policies set by the central government, which divides responsibility for meeting national targets among the various provinces. The provinces then distribute decision-making targets among their jurisdictions: prefectures, counties, and cities. Local governments will sometimes try to hinder or slow down the implementation of national policies, as these policies may not be well understood or may conflict with local interests. The more economically advanced areas are inclined to push for stringent environmental regulations and to set ambitious energy and climate goals. For instance, Beijing and Shenzhen have set the goal of achieving peak emissions ahead of the 2030 national goal–by 2020 and 2022, respectively. Together with the FYPs, this will increasingly enable the authorities to draw on experiences with implementation when developing new targets towards net zero emissions.
The climate-policy dynamic varies significantly among the three key actors in focus here. The EU has based its policies for 2030 at least partly on previous implementation experiences and learning, whereas implementation and policy cycles in the USA and China are partly blocked by polarization and the provinces, respectively.
Recessions and economic recovery packages
External shocks, like the economic crisis following the coronavirus pandemic, may affect policy development as disrupters of stability, providing windows of opportunity for rapid policy innovation—or causing lower ambitions.
Thus far, the EU has used the crisis chiefly as an opportunity for strengthening the European Green Deal and climate policies. In July 2020, the EU leaders adopted the recovery package ‘Next Generation EU’ and the Multiannual Financial Framework for 2021–2027, with a combined weight of over €1.8 trillion. It was decided to dedicate at least 30% of this package to climate- and environment-relevant spending, but the effect will depend on implementation in member-state recovery and resilience plans.
In the United States, neither the Trump administration nor Congress linked economic responses to climate policy in the $2.2 trillion economic stimulus bill (the Coronavirus Aid, Relief, and Economic Security (CARES) Act) adopted in March 2020. Attempts were made by Democrats to add prolonged tax credits for renewable energy projects in the CARES Act, but the Republican majority in the Senate rejected this. In the second stimulus bill adopted in December 2020, a $900 billion policy package, extension of federal tax credits for wind and solar power plants, as well as tax credits for carbon capture, biofuels and alternative fuels, fuel cells and energy efficiency were included.Footnote 19 Moreover, the Biden administration has promised a distinct green-growth approach in future coronavirus economic recovery plans and other policy reforms. In January 2021, Biden announced his Build Back Better Recovery Plan that aims to increase investments in infrastructure and manufacturing, innovation, research and development, and clean energy.Footnote 20 The plan includes several references to the economic benefits of strengthening sectors like infrastructure in ways that simultaneously create green jobs, boost the economy and reduce emissions.
In China, no economic goals for the coming year were set at the 2020 National People’s Congress, due to Covid-19 economic uncertainties. This was viewed as positive for climate change. The authorities have presented stimulus packages, almost $430 billion in stimulus payments to help the economy recover from the coronavirus crisis, including climate-friendly initiatives like approval of two new nuclear plants and tax exemptions extended by two years for electric and other clean-energy vehicles.Footnote 21
Thus, only the EU has utilized the coronavirus pandemic mainly as an opportunity for strengthening climate policy by recovery funds.