The Role of Carbon Pricing in the Future EU Climate Policy


1 July 2014


Istanbul, Turkey

At the 5th World Congress of Environmental and Resource Economists, held in Istanbul between 28th June and 2nd July 2014, the CECILIA2050 consortia organised a policy session to discuss the perspectives of EU Climate Policy for 2030 and beyond. The session featured four distinguished panelists: Andreas Barkmann (European Environment Agency), Aldo Ravazzi (Italian Ministry of the Environment), Paul Ekins (University College London) and Andrew Błachowicz (Climate Strategies), moderated by Benjamin Görlach of the Ecologic Institute.

In the policy session, the four panelist offered their views on the various political, technological, legal, economic and social challenges that the EU is facing in the process of advancing its climate policy agenda. Thus, conventional logic suggests that policy making begins with policy objectives, and then identifies the policy instruments that promise to reach these objectives at least cost, and then proceeds to implement these. However, as the panelists pointed out, reality is more complext: to begin with, there are multiple objectives that are relevant for climate and energy policy. Their importance may change over time - sometimes drastically so; and the different EU Member States may hold radically oppposed views on the relative importance of different targets. Thus, while the EU remains committed to its long-term climate targets, climate policy is arguably no longer the most important driver in this area - in the wake of current affairs, energy security and affordability have become the dominating topics.

Regarding the role of carbon pricing in the climate policy mix, the panelists underlined the key role of carbon pricing, but also cautioned to keep expectations realistic. As a matter of pragmatism, there was agreement that the EU ETS is here to stay: while some scholars might have preferred to see a carbon tax, this has proven to be politically infeasible at the EU level, and this is unlikely to change. Thus, in order to deliver a carbon price, the efforts should be on reforming the EU ETS, as well as expanding the use of fiscal instruments in the sectors not covered by the EU ETS - including the removal of environmentally harmful subsidies.

The ensuing discussion with the audience touched upon a number of points, including the linkages to the international climate negotiations. One important conclusion concerned the importance of soft factors for policy making: whether or not an ambitious EU climate policy is possible depends not so much on the design of policy instruments, sophisticated analysis or theoretical arguments for the optimisation of the policy mix - but very much on matters such as trust and solidarity among Member States, the perceived fairness of the policy proposals, and their communication.