Climate Change Requires Long-Term Action. How Can Policymakers Deal with Uncertainty When Planning Far Ahead?

By Ichiro Sato, World Resources Institute

The Paris Agreement invites countries to integrate sustainability and climate action into their broader economic and social policies by creating “mid-century, long-term low greenhouse gas emission development strategies” (LTS) by 2020. Only 10 countries have submitted their strategies to date, with one of the major barriers to long-term climate planning being uncertainty.

“Mid-century” means planning for the three decades ahead. Our ability to foresee technology, business, lifestyle and political trends through such a long time horizon is limited. In the increasingly interconnected global economy, where change happens at faster and faster rates, even the near-term future can be uncertain. Any number of disruptive technologies or geopolitical shifts could wait ahead. Amid this uncertainty, policymakers may be tempted to take a wait-and-see attitude to making important decisions. However, climate change is already impacting communities around the world, with climate risks set to multiply in the coming decades if countries do not take more urgent and ambitious action.

To get insights on how to better address uncertainty while developing LTS, WRI sought five expert perspectives from leading researchers. Here are their insights on how national governments can take decisive climate action even in the face of uncertainty.

1. Depict multiple future pathways

One approach, already used by countries such as the UK, U.S. and Czech Republic to develop their LTS, is to analyze multiple scenarios for the future, with a variety of policy opportunities for countries. Given the uncertainty and complexity clouding our future, we cannot assume there is a single future scenario, nor is there a single best pathway to attain goals under each scenario. Instead, we need to explore multiple possibilities.

However, the current practice of scenario analysis typically selects just a handful of scenarios without systematically exploring diverse possibilities. According to Robert Lempert of the RAND Corporation, a group of approaches and methods called Decision Making Under Deep Uncertainty (DMDU) can improve this process by expanding the range of exploration. The DMDU approach offers not just a stress test of an initial policy plan, but also helps identify signposts to monitor (for example, whether sea levels rise as projected) and leads to potential contingency options in the event of surprising developments (e.g. two meter sea level rise vs. an expected one meter).

Having multiple pathways would not be very helpful if such pathways do not guide decision-makers on what actions to take now or to give priority to among many options. According to Sandrine Mathy of the Grenoble Applied Economic Laboratory, many near-term actions are common to multiple policy pathways, making it possible for a country to take those actions without later regrets. Marjolijn Haasnoot of Deltares and Detlef Van Vuuren of Utrecht University point out that Dynamic Adaptation Policy Pathways (DAPP) are powerful tools to help identify those common near-term actions and to guide switching points between multiple pathways if needed.

2. Invest in actions that make future options possible

Haasnoot and Van Vuuren point out the importance of preparatory actions to keep future options open. Mathy gives good examples of such preparatory actions.

For example, countries can invest in low-cost, low-regret investments such as household energy efficiency and renewable energy now with confidence that these actions combat climate change effectively under nearly any scenario. However, these measures still require preparatory actions to scale them across entire countries, such as government intervention to reduce costs for households, remove regulatory barriers and increase consumer acceptance.

Preparatory actions are even more critical for larger investments, such as next generation nuclear power plants or large-scale carbon capture and storage facilities. These sorts of investments may not be immediately viable or necessary but may well be in the future. To make them possible, policymakers need to take action in the short term to allow lead time for technology development, preparatory studies and consensus building.

Russell Wise of CSIRO Land & Water calls attention to the fact that some transformative options needed to achieve the Paris Agreement goals are unprecedented and may be socially unacceptable or even illegal now. Making these options possible will require strategic efforts to understand risks, tradeoffs, develop governance mechanisms and raise understanding.

3. Enhance political durability

Policy certainty is often threatened by political uncertainty. While there is no silver bullet for making climate action politically attractive for all, there are ways to enhance the overall political durability of LTS. Wise explains the importance of creating a strong “authorizing environment” for the LTS by engaging diverse stakeholders. Secondly, Sergey Paltsev of Massachusetts Institute of Technology points out LTS should encompass multiple social and economic goals that matter to large swathes of the country. If LTS are narrowly focused – on only decarbonization for instance – it won’t attract a broad range of stakeholders and interest groups to engage with it, leaving the policy vulnerable to changing political winds.

While engaging diverse stakeholders and addressing multiple goals in today’s complex society is difficult, support tools are available for guiding such a process. Notably, the DMDU approach mentioned above is designed to identify robust strategies in complex and uncertain situations, accommodate multiple objectives and diverse (sometimes diverging) views, and to make trade-off considerations transparent.

4. Reduce policy uncertainty

While the future will always hold uncertainty, governments have the power to reduce some specific uncertainties. Changing or ambiguous government policy can be a major source of uncertainty for the private sector, in turn causing uncertainty in private investment trends.

Paltsev recommends that governments solve this problem by providing a stable policy environment with clear goals. Deploying simple and transparent policies can help incentivize governments’ desired investments into cleaner technologies and sustainable business models. For example, policies like a decarbonization target provided by law or a carbon price with a clear timeline for increasing over time, would reduce policy uncertainty for investors.

5. Craft flexible and adaptive policy measures

While the overall policy environment and goals need to be stable to reduce uncertainty for businesses and households, policy measures must still be flexible enough to adapt to changing conditions. Because the most effective and cheapest technologies could change over time, technology-neutral policy instruments have an advantage. Paltsev highlights carbon pricing as an especially effective policy in this sense, for reducing emissions reduction from various technologies in the most economically efficient way.

However, technology diffusion does not depend solely on price signals. Often governments need to remove non-economic barriers for certain technologies to be deployed at scale. For example, for rooftop solar photovoltaic systems to become widespread, regulations on their connection to power grids may need to change. For electric vehicles to take off, enough charging stations need to be available in public places. Mathy argues for more targeted policies to remove such barriers, but Paltsev cautions that policymakers should take care to avoid adverse interactions between different policies.

6. Systematize monitoring, revision and learning

Building a monitoring and revision mechanism into LTS is key to ensuring robust, adaptive strategies. Haasnoot and Van Vuuren explain that by monitoring various social, economic and physical benchmarks, decision-makers can know when to switch from one policy pathway to another. Ongoing monitoring is also important to detect changes in relevant assumptions and to consider new information that could prompt revision of LTS. Wise points out that learning is a fundamental element of strategies to deal with complex systems. Policymakers should make sure to promote a shared understanding of problems, effective strategies and actions among different stakeholders.

Planning for Uncertainty Improves Long-Term Strategies

These six guiding principles, approaches and tools can help countries address uncertainty when developing their LTS. Uncertainty poses a challenge, but it also provides an opportunity to improve the overall effectiveness and feasibility of LTS in tackling climate change and sustainable development well into the future.

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This post was originally published at the World Resources Institute blog.

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