Report

Key Political Economy and Entanglement Issues of the Low-carbon Transition in G20 Countries

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Entangled power lines with hot sun.
Photo iStock.com/Patanasak

The changing nature of the transition to a low-carbon economy is being recognised by policy makers at the leading edge of climate mitigation. 

Launching at the Petersburg Climate Dialogue as part of the Organisation for Economic Co-operation and Development (OECD)'s project “Growth, investment and the low carbon transition", the report investigates political economy and entanglement issues of the low carbon transition in G20 countries. 

Over recent years policy action and economic drivers have combined to present structural challenges to existing market structures, regulatory systems and incumbent interest groups. These structural impacts cannot be effectively managed through marginal policy instruments such as carbon taxes or energy regulation alone. They require more cross-cutting sectoral reforms. Such political economy effects will become more important as the low-carbon transition deepens in a larger number of countries. 

The report presents three case studies illustrating the value of applying political economy insights when framing new policy approaches. 

Case studies include:

1. Power Sector Divestment – Vattenfall Lignite Asset Sale

The Swedish and German Governments missed a historic opportunity in allowing the sale of Vattenfall’s lignite business to the Czech Investor EPH. The sales process could have set a significant precedent in demonstrating a process for the negotiation and agreement of a long-term plan to close the lignite mines and power plants in a way that was both fair to workers but which also minimised environmental damage.

2. 2050 Plans: A Tool for Orderly Transition or a Shield for Vested Interests?  

Since the early 2000s several G20 countries have been engaging in long-term climate planning as a tool for managing the complexity of the transition to climate resilient economies. The creation of 2050 plans in South Africa, the UK and Germany offer evidence of opportunities gained and limitations encountered in taking a long-term approach to climate planning. Long-term plans are both shaped by the political economy they are created in and can shape emerging political economies.

3. Carbon Capture and Storage: In Search of Commercialisation.

This case study explores lessons learnt in the UK and the EU following the failure of policy efforts to accelerate the demonstration of commercial scale carbon capture and storage (CCS) for coal fired power generation. The weaknesses of the approach taken are discussed from the perspective of political economy barriers to deployment that were not appreciated or addressed. 

Download Key Political Economy and Entanglement Issues of the Low-carbon Transition in G20 Countries.pdf [1,811 KB]