Climate Policy Problems: The Concept of a Sustainable Social Market Economy

Abstract

The transition of economic systems toward production and consumption with very low CO₂ emissions is a major challenge. This transition needs to be accomplished after two centuries of industrialization which continued until about 1980 without critical inquiries from the scientific field with regard to the burning of fossil fuels or the use of coal/coking coal in the steel industry. If an economy without carbon is to emerge and function, getting there is indeed a historic task that is extremely challenging. Having the openness and creativity to mobilize the innovation dynamics of people and firms around the globe will be a major task for government in all countries; in the field of environmentally friendly innovation dynamics, international competition is effective in many areas, and in the EU, it will also be possible to develop meaningful approaches toward an environmentally friendly industrial policy. The framework conditions on the economy must therefore be changed appropriately so that incentives are moved in the direction of a low-carbon economy. Regular international benchmarking can spur the ambition of economic policy, where new instruments should also be examined. The concept of a sustainable social market economy is presented in the context of internationalized climate protection—including a look at Japan’s certificate trading system as well as digitalization and consumption more generally.