The governance model to take on climate change
5 min read 13 Sep 2022, 10:14 PM ISTLet’s dump the state-versus-market dichotomy and learn from participatory processes behind the Montreal Protocol’s success.
PremiumOur world is undergoing an economic transition that will require effective government action on many fronts to manage climate change, ensure public health and rebuild our middle classes through good jobs and innovation. But are our governments up to it? There is wide scepticism about governments’ ability to lead and achieve positive change. Such doubts may be well-placed. Polarization and authoritarian populism, which are mutually reinforcing, have overrun the public sphere in many countries and undermined the capacity of societies to mount collective action, both domestic and multilateral, against common problems.
Moreover, a longer-standing concern about government is that it has neither sufficient information nor the capabilities necessary to achieve positive structural change in the economy. Give governments too much power, the argument goes, and they will direct resources toward the wrong places and become captive tools of special interests. This argument lies at the heart of neoliberalism, and it will have to be overcome for any successor paradigm—like productivism—to succeed.
You might also like
Big IPOs coming. Is the market ready?
Why we need less food in our inflation basket
Sebi probes 20 funds managing ₹10,000 crore
Why you should be wary of business cycle funds
A more accurate account of state capabilities recognizes that they are neither inherited nor static. Rather, once appropriate priorities are set, they develop over time through experience, learning and trust-building with private entities. For public officials, the relevant question is not “Do we have the capacity?" but, “Have we established the right priorities and the correct mode of governance?"
Sceptics might say that this sounds good in theory but remains unachievable in practice. Just look around, and you can find failures of public governance almost everywhere—locally, nationally and globally. But as Columbia Law School’s Charles Sabel and David Victor of the University of California, San Diego, show in a new book, effective governance models do exist and have already made a big difference. The practice is there; it is the theory that is lacking.
Sabel and Victor focus on climate change, which is the greatest policy challenge of our time. It is also an area where governance is doubly difficult: regulations must not only be effective at the national level, they also must be negotiated globally among states with different interests and circumstances.
Sabel and Victor build their argument on the example of the 1987 Montreal Protocol, which has succeeded in curbing ozone-depleting substances (ODS) to the point where the ozone layer is now on course to full recovery. From the outset, ozone depletion and climate change looked like similar challenges, because both involve significant scientific and technological uncertainty and major differences among the positions of advanced and developing economies. That is why the 1992 United Nations Framework Convention on Climate Change (UNFCCC), the first global climate agreement, took the Montreal Protocol as its model.
The Montreal Protocol and the UNFCCC both started out as very ‘thin’ regimes, relying on broad commitments to cut emissions (of ODS and greenhouse gases, respectively) by a certain date, but with little operational content. But the two regimes evolved differently. While the Montreal Protocol made steady progress by bringing firms and governments together to tackle concrete technological problems, climate-change agreements have often ended up stalled in global negotiations.
Sabel and Victor call attention to a key difference between the two regimes: the Montreal Protocol created sectoral committees in which ODS-emitting firms joined national regulators and scientists in seeking technological alternatives. These groups started small, but they expanded and multiplied as knowledge was accumulated, capabilities were acquired and trust was built among parties. This approach worked because the problem solving was devolved to local actors—namely, firms with the requisite technological know-how. When innovation stalled, targets were reset. The result was a virtuous loop of on-the-ground innovation and top-level goal setting. Under the climate regime, by contrast, firms have been kept at arm’s length from regulators, owing to fears that they would capture the process. But this has entrenched conflicts of interest and hampered innovation.
The Montreal Protocol is not the only successful case of what Sabel and Victor call “experimental governance." Additional examples can be found across a wide range of national and sub-national programmes, from the US Advanced Research Projects Agency–Energy (ARPA-E) to Ireland’s agricultural-pollution regime. In each case, ground-level experimentation is coupled with higher-level goal setting. The successful practices that emerge from these collaborations are then routinized through dissemination and standard setting.
Nor are the success stories limited to environmental policy. ARPA-E, after all, is modelled on the Defense Advanced Research Projects Agency (DARPA), the US agency responsible for some of the landmark innovations of our time, including the internet and GPS. At the local level, the most successful initiatives to revitalize communities and create jobs take the form of private-public collaborations that bring together training programmes, businesses, non-profit groups and public officials to create new pathways to economic opportunity. Effective national industrial policies take a similar collaborative, cross-sectoral approach.
As Sabel and Victor explain, the general strategy in all these domains is to start out with ambitious, somewhat ill-defined goals. Programme leaders must acknowledge deep uncertainty and hence the likelihood of mistakes and false starts. There must be incentives for the parties with the most detailed and accurate information (typically firms) to look for solutions, which means that public agencies must establish some combination of sticks (the threat of regulation) and carrots (incentives and public inputs).
Since success depends on frequent reassessments and revisions, setting milestones and monitoring progress is crucial. When solutions do emerge, they can be generalized in the form of standards or regulations. Innovation lies at the centre of this process, because higher living standards (including a cleaner environment and better jobs) are possible only through enhanced productivity. This kind of policymaking differs from current approaches. From the experimental-governance perspective, the ‘state versus market’ dichotomy is simply irrelevant. States and markets are complementary. Economists’ standard top-down, principal-agent model of regulation becomes unhelpful. To succeed, a new paradigm like productivism will have to transcend the stale ideologies of the past. Fortunately, the models of governance that it needs already exist, and in abundance. ©2022/Project Syndicate
Dani Rodrik is professor of international political economy at Harvard University’s John F. Kennedy School of Government, and the author of ‘Straight Talk on Trade: Ideas for a Sane World Economy’.
Elsewhere in Mint
In Opinion, Vivek Kaul makes a case for merger of Walmart, Netflix and Spotify. Shephali Bhatt argues why hot takes from hot seats don’t always yield hot brands. Andrea Felsted writes on the post-pandemic lipstick effect. Long Story gets inside Sebi’s battle to tame algo trading.
