Policy instruments are tools that decision-makers can use to influence society in a certain direction, for example to become more sustainable. This includes information and education, but also taxes, laws and emissions trading. Governance that not always sits well with all industries or interest groups, or for that matter with the citizens.
Thomas Sterner, Professor of Environmental Economics at the Department of Economics at the University of Gothenburg, has focused his research on the design of environmental policy instruments and is a member of the City of Gothenburg's Climate Council. With a grant of SEK 15 million from the Kamprad Family Foundation, he has now secured funding for five years for the research project 'Policies for a Sustainable Society'.
The project allows me the opportunity to tackle the big and important questions we are facing
– The project allows me the opportunity to tackle the big and important questions we are facing: how can we achieve a sustainable society when there is resistance to environmental policy? For example, how to increase understanding and acceptance of the pricing of carbon dioxide and other climate-impacting emissions, says Thomas Sterner.
"We have to manipulate the price system"
One policy instrument currently used in certain areas is to minimize greenhouse gases through emission allowances; a country is allocated a quota and is then entitled to emit a corresponding amount of carbon dioxide into the atmosphere. Since the system was introduced in 2005, EU emissions have been reduced by 41%. However, the emissions trading has met with opposition, including lobby groups from the fossil fuel industry. It has also been criticized for being inefficient.
– The best thing to do is to charge for that which is bad for the environment. The market economy is efficient but does not take environmental costs into account. We have to manipulate the price system so that consumers and producers actually find it cheaper to do what is right for the environment. Then we can hope to achieve improvements in carbon emissions, says Thomas Sterner.
Another source of opposition comes from the general public. In Sweden, the carbon tax has contributed to higher fuel prices, which has led many Swedes to object. Thomas Sterner and his research team will try to understand the mechanisms behind these negative attitudes. The aim is to develop policy instruments that are accepted by citizens, but also the business community. A delicate balancing act.
The business community should utilize its ability to innovate within the limits set
– The state should not decide how cars, homes or mobile phones are built. The state should set benchmarks and rules that prevent harmful emissions of, for example, climate-affecting gases or other environmental effects. Then the business community should utilize its ability to innovate within the limits set, says Thomas Sterner.
Customized solutions
For the policy instruments to be effective, researchers will look at customized solutions for each country. What works in Sweden, for example, may not work in Norway. The conditions for pursuing climate-friendly policies also differ between high- and low-income countries. Part of the project will therefore be used to build a knowledge base in selected countries. By supporting and building local expertise, governments and policy makers can understand how environmental policies affect the specific economic and political situation in the country.
– It is not enough to develop policy instruments; we also need to reach out to decision-makers both in rich countries and indeed in all countries. That's why we need targeted training and capacity-building programs, says Thomas Sterner.
The research is coordinated by the Emissions Pricing for Development (EPfD), led by Thomas Sterner at the University of Gothenburg. The core research group at the Department of Economics and the Environment for Development (EfD) network in Gothenburg will collaborate with researchers in 13 countries in the so-called Global South.
– I think we got the grant because the Kamprad Foundation has a genuine curiosity about environmental and sustainability issues. They are not afraid of the big questions and seem to favor research that strives to find solutions.
Text: Jessica Oscarsson
