GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 32 See, for instance Jacobssonand Lauber (2006) on Germanrenewable energy policy, Christiansenand Wettestad (2003)on the origins and content of theEmissions Trading System legislation,and Schreurs and Tiberghien(2007) on EU climate and energypolicy.3 Indeed, amidst extreme austeritymeasures in the United Kingdomunder the Conservative-LiberalDemocratic coalition after 2010,one of the few things that has notbeen cut is the UK’s aggressiveplan for energy investment andmarket restructuring.4 See, for instance, the EuropeanGreens’ 2009 election manifesto,which called for sweeping environmentalreforms and an explicittradeoff of productivity for employmentin environmental goods industries(European Greens Party,2009; Schepelmann et al., 2009).5 Indeed, in early 2011 the Danishcenter-right government released ahighly ambitious domestic energyand climate policy platform thatexceeded the expectations of nearlyevery major opposition party.Interviews in Denmark shortly afterthe platform was released indicatedthat this will probably set theterms of the debate for the 2011election and subsequent energypolicy choices. See Danish Ministryof Climate and Energy (2011).6 A 20% improvement in energyefficiency accompanies this goal,but as of April 2011 has no legalforce behind it.fossil fuel resources–many of which, like Polish lignitecoal, were particularly dirty energy sources. Yet despitethe increased diversity of interests, the EU continued tomake progress after enlargement on the decarbonizationof the energy supply and the deployment of more expensiverenewable energy.Explaining this ongoing progress poses two challengesfor policy analysts. First, most contemporary accountsof European progress in energy systems transformationor climate change mitigation have relied on eitherdomestic party structures–the role of green parties inparticular–or foreign policy entrepreneurship–chieflyleadership in the United Nations COP process–to explainongoing progress.2 Yet energy reform has continueddespite the enlargement of the EU to include countrieswithout strong green movements; and amidst thereturn of center-right parties to government in countrieslike Denmark, Germany, and the United Kingdom.3 Furthermore,the failure of EU policy leadership to securebinding emissions targets at the 2009 COP-15 negotiationshas made no appreciable difference to the goals ofEU climate policy.Second, these political accounts of Europe’s energysystems transformation have little to say about the particularcontours of European policy. The choice of a policysuite that includes a carbon emissions trading system,a renewable energy mandate, and energy market liberalizationis in many cases at odds with European greenparties’ preferences. Indeed, if the green parties were asimportant to policy outcomes as is claimed, we would expectto see much more radical policy than we do: moreaggressive targets, less dependent on market-based instrumentslike carbon pricing, founded on a strongercritique of the ecological and equity costs of capitalism.4Moreover, progress on both energy market reform andemissions reduction has continued despite, as in Denmarkand Germany, the return of center-right parties togovernment.5"To a great degree, the stability of the European energypolicy suite relies on spillover benefits in energy securityand competitiveness to justify ongoing emissionsreduction."Beyond these theoretical arguments, an improvedunderstanding of the policy rationale at work in Europeis critical for two purposes. First, it provides a responseto the self-styled “price fundamentalism” of economicanalysis.(Nordhaus, 2010) Such fundamentalism usuallyleads to the conclusion that the EU policy mix representsan inefficient departure from a ideal price-based emissionscontrol mechanism. But this conclusion arises froman emphasis on emissions reduction to the exclusion ofother policy prerogatives, and in doing so obscures thepotential reality that, absent this policy suite, the politicaleconomy of energy and climate policy would not havetolerated a carbon price at all. The choice, in other words,was not between the first- and second-best, but betweenthe second best and nothing.Furthermore, a better understanding of the policyrationale will improve our ability to predict the successand longevity of the policy itself. To a great degree, thestability of the European energy policy suite relies on spilloverbenefits in energy security and competitiveness tojustify ongoing emissions reduction. This “green growth”strategy promises to turn on its head the core problem ofclimate change mitigation–the tradeoff of present consumptionfor future benefits–by reconciling emissionsreduction to economic growth in the present. If successful,this would mark a radical shift in the potential for seriousemissions reduction. If not, it marks a critical weakpoint in European ambitions and an implicit limit to thetolerance for the costs of emissions reduction.3 The european energy policy suiteAs of 2010, the EU has deployed a range of policy mechanismsto reduce emissions, secure energy supplies, andincentivize energy sector innovation. This suite of policiesshould be seen as an attempt to simultaneously addressthree energy-centered externalities: global climatechange; energy security and price instability; and competitivenessand technological innovation. The existenceof multiple energy-related externalities complicatesthe problem of policy formation. But it also provides ameans to build sustained policy coalitions through linkageof objectives in one domain to action in others. Thatlinkage generates policy stability in two ways: first, thebeneficiaries develop acute interests in ongoing progressthat allow emissions reduction policies to move beyondmere cost minimization; and second, linkage providesfor cross-subsidization of transition costs among politicaland economic actors both within the member statesand between them. Indeed, whether intentional or not,the policy suite that has developed in Europe over thelast decade shows all the signs of fulfilling these politicaleconomy functions.3.1 Progress in European energy policy, 2000-2010As of 2010, the European energy policy suite consists offour major initiatives:1. The Emissions Trading Scheme, which sets a price onenergy-derived carbon emissions for approximately40% of the European economy via annual limits onemissions and a secondary market for emissions permitswithin that limit.2. The Renewable Energy Directive, which puts bindingtargets on member states to consume, as an EU average,20% of their electricity from renewable sources by 2020.63. The Energy Market Liberalization Program, whichmandates the breakup of vertically integrated nationalenergy markets into separate domains of production,distribution, and retail; and which sets new terms formarket competition in wholesale and retail energyprovision(Jamasb and Pollitt, 2005).4. The SET-Plan and Framework Programmes, whichGreen Growth: From religion to reality 23