Insight Brief: The Climate Policy Explorer

Background: In-Depth Analysis of 1,500 Policy Measures and 63 Success Stories

An international research team has unveiled the first comprehensive global evaluation of 1,500 climate policy measures from 41 countries across six continents. Published in the prestigious journal Science, this unprecedented study provides a detailed impact analysis of the wide range of climate policy measures implemented over the last two decades. The findings reveal a sobering reality: many policy measures have failed to achieve the necessary scale of emissions reductions. Only 63 cases of successful climate policies, leading to an average emission reduction of 19 percent, were identified. The key characteristic of these successful cases is the inclusion of tax and price incentives in well-designed policy mixes.

Much of the debate about climate policy centres on which climate policy instruments work in reducing emissions, and which do not. Yet prior evaluations have focused on a limited range of headline policies, neglecting hundreds of other measures. This new study, led by researchers at the Potsdam Institute for Climate Impact Research (PIK) and the Mercator Research Institute on Global Commons and Climate Change (MCC) in collaboration with experts from the University of Oxford, the University of Victoria, and the Organization for Economic Cooperation and Development (OECD), aims to fill this gap. An accompanying interactive website, the “Climate Policy Explorer,” offers a comprehensive overview of the results, analysis, and methods, and is available to the public.

“We systematically evaluated policy measures that have rarely been studied until now, providing new insights into well-designed combinations of complementary policy instruments. From this, we derive best practices - for the building, electricity, industry and transport sectors, and in both industrialized countries and often neglected developing countries,” explains lead author Nicolas Koch from PIK and MCC. “Our findings demonstrate that more policies do not necessarily equate to better outcomes. Instead, the right mix of measures is crucial. For example, subsidies or regulations alone are insufficient; only in combination with price-based instruments, such as carbon and energy taxes, can they deliver substantial emission reductions.”

The study highlights specific examples to illustrate this point. For instance, the researchers show that bans on coal-fired power plants or combustion engine cars do not result in major emissions reductions when implemented alone. Successful cases only arise in tandem with tax or price incentives, as shown in the UK for coal-fired power generation or in Norway for cars.

The research uses a methodology developed by Climate Econometrics at The Institute for New Economic Thinking at the Oxford Martin School (INET Oxford), that measures ‘emission breaks’ that followed policy interventions. The break detection methodology, called indicator saturation estimation, developed at Climate Econometrics, allows break indicators for all possible dates to be examined objectively using a variant of machine learning.

Climate Policy Explorer: A Comprehensive Resource

The interactive Climate Policy Explorer offers detailed insights into specific countries, sectors, and policy measures. In the industrial sector, for example, China’s pilot emissions trading systems significantly reduced emissions after a few years, complemented by reduced fossil fuel subsidies and stronger financing incentives for energy efficiency.

The researchers evaluated 1,500 policy interventions implemented between 1998 and 2022, covering the entire spectrum of climate policy instruments, from energy-related building codes to purchase subsidies for climate-friendly products, and carbon taxes. Using a new OECD database, which represents the most comprehensive inventory of climate policies worldwide to date, and an innovative approach combining machine learning methods with established statistical methods and techniques, the team conducted a detailed impact evaluation of these policies, identifying those measures that achieved large-scale emissions reductions.

Some findings from the Climate Policy Explorer include:

• The researchers show that bans on coal-fired power plants or combustion engine cars do not result in major emissions reductions when implemented alone – additional policies need to be included in a suitable policy-mix.
• Successful cases arise in tandem with tax or price incentives, as shown in the UK for coal-fired power generation or in Norway for cars. While tax or price incentives can be very effective, as shown in the UK for coal-fired power generation or in Norway for cars, even when they are implemented in isolation, other policies need to support each other in a well-designed policy-mix.
• In the electricity sector, the UK achieved major emissions reductions through a minimum carbon price, subsidies for renewable energy, and a coal phase-out plan.
• The US is an example of significant emission reductions in the transportation sector, resulting from a mix of tax incentives and subsidies for low-emitting vehicles and CO2 efficiency standards. Germany’s eco-tax reform and truck toll introduction is another notable success story in the transport sector.

These findings and more, can be explored interactively on the Climate Policy Explorer website climate-policy-explorer.pik-potsdam.de

I would say: While tax or price incentives can be very effective, as shown in the UK for coal-fired power generation or in Norway for cars, even when they are implemented in isolation, other policies need to support each other in a well-designed policy-mix.

What works: Examples from the UK and USA

Conclusions

The Research Team concluded:

1. The Paris emissions gap can be closed: Focusing on the typical effects that the 63 effective identified policies had would close the emissions gap by 26%-41% – a significant contribution to meeting Paris Targets.
2. Climate policies are more effective as part of a mix: In the majority of cases, effect sizes are larger if a policy instrument is part of a policy mix rather than implemented alone.
3. Developed and developing countries have different climate policy needs: In developed countries, pricing stands out, whereas in developing countries, regulation is the most powerful policy.

What the authors say

Annika Stechemesser, Lead author from PIK said “While it remains challenging to precisely disentangle the effects of individual measures within a policy mix, our 63 success cases provide systematic insights into effective policy combinations, and show how well-designed policy mixes depend on sectors and the development level of countries,” notes. “This knowledge is vital for supporting policymakers and society in the transition to climate neutrality.”

Nicolas Koch, lead author from PIK and MCC said: “We systematically evaluated policy measures that have rarely been studied until now, providing new insights into well-designed combinations of complementary policy instruments. From this, we derive best practices - for the building, electricity, industry and transport sectors, and in both industrialized countries and often neglected developing countries.

Our findings demonstrate that more policies do not necessarily equate to better outcomes. Instead, the right mix of measures is crucial. For example, subsidies or regulations alone are insufficient; only in combination with price-based instruments, such as carbon and energy taxes, can they deliver substantial emission reductions.”

Ebba Mark, at researcher at the Calleva Project at the Institute for New Economic Thinking at the Oxford Martin School and Smith School of Enterprise and Environment, said the world needed to get back on track to meeting the Paris Climate Accord targets.

“Meeting the Paris Climate objectives necessitates decisive policy action as we are still falling short - data from the UN estimates a median emissions gap of 23 billion tonnes of carbon dioxide equivalent by 2030. Fortunately, we have seen a significant increase in the number of climate policies implemented in the last two decades in the countries studied. However, in our analysis we were ultimately only able to attribute a small fraction of the about 1,500 policies as having achieved a major reduction in emissions in the 63 instances identified.

It is now clear that the persistence of this emissions gap is not only attributable to an ambition gap but also to a gap in the real versus expected outcomes of implemented policies. The 63 success stories identified in this study provide key information about how we can bridge the emissions gap more meaningfully going forward.”

Moritz Schwarz, Research Fellow at the Technical University of Berlin and Potsdam Institute of Climate Impact Research as well as a Climate Econometrics Associate at the University of Oxford, said that identifying effective policies is crucial to guide policymakers in designing the most meaningful interventions.

“Our results inform contentious policy debates in three main ways.

“First, we show evidence for the effectiveness of combining different types of policies in mixes. These include popular subsidy schemes and regulatory instruments such as bans, building codes, energy efficiency mandates and labels for which we find larger reduction effects in policy mixes compared to the case of a stand-alone implementation.

“Second our findings highlight that successful policy mixes vary across sectors and that policy-makers should focus on sector-specific best practices.

“Third our results stress that effective policies vary with economic development. For instance, in sharp contrast to developed economies, we do not find any successful pricing intervention with large emission reductions in the electricity sector of developing economies, even though around 13% of policies are pricing interventions.”

Felix Pretis, Deputy Director of the Climate Econometrics Programme at Nuffield College, University of Oxford, said that the research and data would be made available to policymakers across the world.

“Scaling up good practice policies identified in this study to other sectors to other parts of the world can in the short term be a powerful climate mitigation strategy.

“Our results provide a clear and sobering perspective on the policy effort necessary for closing the remaining emissions gap of 23 billion tonnes of CO2 equivalent by 2030.

“Using the effect sizes of the detected breaks, we compute a hypothetical scenario in which all 41 countries in our sample achieve emission reductions the size of the average (highest) detected sectoral effect size once before 2030. We estimate that this would close the emissions gap by 26% (41%) – a significant contribution.

“Our dashboard provides an accessible platform for policy makers to conduct country-by-country, sector-by-sector comparisons.”

Dr Anupama Sen, Head of Policy at the Oxford Smith School of Enterprise and the Environment said:

"In order to meet its zero goals, UK policymaking must shift from focusing solely on the upfront costs of the climate transition, and start accounting for the considerable benefits that will accrue over years to come. In more than 80% of investments the total lifetime cost of a clean technology is considerably lower than that of a fossil technology. While the new UK government’s policies are moving in the right direction, they need to go further and faster to unlock these lower costs. New Oxford research now provides evidence that an optimal mix of policies can achieve this, and rapidly lower a country’s emissions. The accompanying Climate Policy Explorer, released today, can be confidently leveraged as a tool to craft an efficient transition for the UK.

ENDS.

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