As Canadians prepare to elect a new government, the rapid deterioration in relations with the US would be front of mind. However, the slow pace of decarbonization of our planet and Canada’s role in turning that around must be right alongside it.
The chance of limiting global warming to 1.5°C above preindustrial levels, as set out in the 2015 Paris climate agreement, is now vanishingly small. Despite many countries’ efforts, global greenhouse gas emissions have not even started to fall, and would have to decline by a staggering 7.5 percent per year to stay within the carbon budget envisaged by the Paris agreement. If that does not change soon, the planet would start to cross climate tipping points, from the collapses of the Greenland ice sheet and the Labrador Sea current to the abrupt thawing of the permafrost.
Addressing that existential crisis requires implementing policies that would accelerate the pace of decarbonization by leveraging the improvements in green energy generation and infrastructure. The desire is seemingly there — global surveys show that voters want more, not less, climate action. However, politicians rightly sense that they would be penalized in the next election for taking aggressive action, leading to an overly cautious approach. We are thus winning the war too slowly, which, as climate activist Bill McKibben said, is the same as losing.
The political backlash against climate action is growing worldwide. Green parties are in retreat across Europe, and the European Commission is rethinking its Green Deal legislation in light of the continent’s declining competitiveness, stoking fears that the bloc might scale back its targets. From Australia to Germany, incumbent governments have faced public pressure to abandon green policies. US President Donald Trump ran for re-election on a platform that promised to “drill, baby, drill” and to reverse former US president Joe Biden’s signature climate policy. Similarly, in Canada, the Conservatives have embraced the rallying cry, “axe the tax” — referring to Canadian Prime Minister Justin Trudeau’s carbon tax.
Policy backsliding is to be expected on occasion and global progress must be resilient to such lapses, as it was during the first Trump administration. However, the populist revolt against green policies offers some important lessons for the next Canadian prime minister.
Some of that pushback reflects the fact that the costs of climate action are not evenly distributed. To be politically sustainable, such policies must internalize those costs in the initial design phase. For example, economists have rightly championed carbon taxation as the most efficient way to curb emissions. However, sometimes efficiency must be sacrificed — in this case, by resorting to alternative instruments or complementary measures to soften the blow of the green transition on segments of society that are less able to bear the cost.
To be clear, that does not mean invoking the compensation principle, which claims that the most efficient policy maximizes the resources available to provide compensation for those negatively affected (it does), but fails to recognize that such compensation rarely takes place. Nor is it enough to say that if carbon taxation is revenue-neutral, as it is designed to be in Canada, that would somehow ensure that compensation would reach those who need it. Voters are smart, and unless policy credibly convinces potential losers that they would be made whole, the mere risk that they would lose can provoke a backlash. And, as we are seeing now, even a small group of affected citizens can wield outsize political influence, and their cause can be taken up by populist politicians.
That is not idle theorizing. A paper published by the IMF in 2023 examined whether climate policies were politically costly in Organisation for Economic Co-operation and Development countries, including Canada, over the past few decades. IMF findings suggest that a voter backlash is avoidable when policy design ensures that those likely to lose disproportionately — whether poorer households or fossil fuel firms — are protected, for example through social insurance, monetary compensation or the gradual phase-in of green policies. Perceptions matter, too, and the research implies that some measures, especially carbon taxes, are particularly likely to be unpopular, while regulations that reduce emissions at a slightly higher social cost are more palatable for voters.
Climate policies must be compatible with social and political realities, and not based solely on economic efficiency. That is a lesson for all countries — including Canada — experiencing broad pushback against green measures. The world cannot afford populist politicians denigrating decarbonization as a harmful obsession of the elite. Buy-in from the households and firms that would disproportionately bear the costs is necessary if we are to have any chance of avoiding catastrophic global warming.
Jonathan D. Ostry, formerly a senior official at the IMF, is professor of economics, global affairs and public policy at the University of Toronto and a nonresident fellow at the Brussels-based think tank Bruegel. His recent books include Confronting Inequality and Taming the Tide of Capital Flows.
Copyright: Project Syndicate
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