What can governments do to make a difference?

Governments are key political actors that can drive fast industry decarbonisation, but their policies so far have not reflected the magnitude and complexity of the challenge. To make a difference, governments need to adopt long-term ambitious strategies across sectors and supply chains, as well rethink the broader political economy.

Governments are key political actors in decarbonisation governance by providing the necessary legitimacy, regulatory frameworks, and political and socio-economic conditions that can support deep and fair transformations across every single economic sector in all EU countries. So far, however, governmental policies have not necessarily had the desired impact on the magnitude and complexity of the challenge. To make a difference, governments need to do the following.

First, directionality is a key element. Governments adopting a long-term and ambitious vision and strategy based on regulatory frameworks and subsidies are proven more effective in guiding industries and sectors towards decarbonisation and environmental transformation more generally. Public funding can be a significant driver for decarbonisation especially in terms of investments in research, development and innovation that can ensure benefits for societies and help mitigate prohibitive levels of business risk. Likewise, government rulings including those for carbon pricing, green certification, and enabling acts of legislation that mandate action on decarbonisation, set carbon budgets and legally-binding targets are very important for fostering decarbonisation transformations. 

Second, to drive decarbonisation, a systemic and holistic approach across all sectors and supply chains is more desirable than a piecemeal approach. For plastics, for example, policy responses adopting such an approach would address the entire value chain from production to waste and recycling. Likewise, different forms of support or collaboration (either in addition to funding/regulation or as solitary measures) with a broader set of societal actors can help foster decarbonisation innovations and transitions in a concerted way. For example, governments establish platforms to promote cooperation between academia and industry [see Tierra case study] and bring key stakeholders together [see Carbon2Chem case study]. They can also support innovations by becoming “first customers” for start-up technologies [see MX3D case study], setting higher environmental standards and promoting the idea of a green economy [see DOCOL case study].

Third, rethinking the role of the broader political economy and especially the finance sector is key. One way to do so is to reconsider terms such as risk and impact to recognise not only the impact of investments on climate change (and therefore the need for decarbonisation) but also the impacts on the financial system by leaving climate risks unaddressed. In this context, governments can mainstream climate risk disclosures to enable investors to make informed decisions and to facilitate the development of new metrics and approaches that contribute to mainstreaming climate considerations [see Financing Net Zero report]. 

In short, the governance challenge for governments is to adopt long-term horizons in planning, act concertedly and in collaboration with each other and broader societal actors, and change current thinking about the relationship between climate change and decarbonisation pathways and the broader political economy.