Suzi Kerr, the chief economist at the Environmental Defense Fund (EDF) and founder of the MOTU Economic and Public Policy Research think tank in her home country of New Zealand, shared her perspectives on international climate change policy in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. Listen to the interview here. A transcript of the interview is available here.
Hosted by Robert N. Stavins, A.J. Meyer Professor of Energy and Economic Development at Harvard Kennedy School and director of the Harvard Environmental Economics Program and the Harvard Project on Climate Agreements, Environmental Insights is intended to promote public discourse on important issues at the intersection of economics and environmental policy.
Kerr was involved in the early design of New Zealand’s successful emissions trading system (ETS), which began in 2008 and is similar to California’s cap-and-trade system.
“It was the second [ETS] in the world and it's economy wide. It's what we call upstream, so it covers…basically all fossil fuels and most other emissions in New Zealand. And one of the highlights I think is that it covers the forestry sector, and New Zealand is still probably the one that covers that most comprehensively,” she said. “A lot of what we were trying to do was experiment and learn so that others could learn from our experience.”
As Europe prepares to begin implementation in 2023 of its carbon border adjustment mechanism (CBAM), intended to mitigate carbon leakage in alignment with World Trade Organization (WTO) policies, Kerr expressed her belief that while it is lower cost to taxpayers and provides advantages over output-based allocation measures, there are many challenges standing in its way.
“The logistical issues of bringing in a CBAM are huge. If we all had carbon pricing, it would be pretty easy, but we don't. We have a whole mix of policies in different countries. Some have carbon pricing, but [other nations have] other policies. That complexity is huge, and the other issue is equity across countries. Does it really make sense for us to be charging countries who have low policy stringency because they're very poor?,” she said. “I think it's critically important that the EU couple any introduction of CBAM with really active support for the poorest countries so that they are supported to have a climate transition rather than expected to do that entirely on their own.”
In the U.S., the Biden Administration has announced its new nationally determined contribution (NDC) under terms of the Paris Agreement, with a pledge to cut greenhouse gas emissions by 50-to-52 percent below 2005 levels by 2030. Kerr said she judges the pledge to be credible, although it will be difficult to achieve.
“The research and the modeling all says it can be done. It's certainly possible and a lot of it can even be done at very low cost. Whether it will be done is a much more challenging question and that's where it gets really hard – actually implementing the policies that are effective. Even if you have the political will, that's a difficult thing,” she remarked. “In general, history teaches us that policies are almost always less effective than we think they’re going to be.”
Kerr’s interview is the 9th episode during 2021 in the Environmental Insights series, with future episodes scheduled to drop each month.
“Environmental Insights is intended to inform and educate listeners about important issues relating to an economic perspective on developments in environmental policy, including the design and implementation of market-based approaches to environmental protection,” said Stavins. “We speak with accomplished Harvard colleagues, other academics, and practitioners who are working on solving some of the most challenging public problems we face.”
By Doug Gavel