By Daniele Malerba
The current energy crisis stemming from the war in Ukraine has shown that long-term climate mitigation needs to be coupled with the reduction of poverty and inequality; it is obvious that climate change is a global problem, and one that needs to be addressed in combination with social justice. In a recent article in an EJDR special issue, we make the case that the relationship and effects of social protection and social cohesion are critical in this sense. Social cohesion is defined as “the vertical and the horizontal relations among members of society and the state as characterized by a set of attitudes and norms that includes trust, an inclusive identity, and cooperation for the common good”
First, it is important to understand the relationships between social cohesion, social protection and climate change mitigation. Apart from world views, such as beliefs on climate change, support for climate policies strongly depends on the personal cost of the policy (“self-interest”) and the cost to others (“distributional issues”), as well as on social determinants, such as social cohesion and trust. In relation to the latter, it has been shown in a growing number of papers that trust in government is critical for public support of climate policies such as carbon taxes.
In terms of the cost of climate mitigation policies, it has been found that fairness (“distributional issues”) is actually the most important determinant for public acceptability, more than personal costs, socio-economic characteristics and knowledge. Recent protests in France are good examples for this, which is where social protection comes in. In fact, one way to make climate policies (and environmental taxes in particular) fair and just is to recycle revenues through social protection mechanisms. So it comes as no surprise that social protection is part of the European Green Deal through the Social Climate Fund and the Just Transition Fund. Many subsidy reforms in the past were successful because they used the freed fiscal space for cash transfers to the poorest or the population as a whole. And our research has shown that redistributing revenues from a carbon tax could lower poverty and inequality.
Interactions between social protection and trust are crucial for climate mitigation as well. Earmarking revenues from a carbon tax is critical and is strongly linked with vertical trust, as it reflects two major voter concerns: one about the effectiveness of the policy; and the other about trust in the government itself. Citizens are more willing to support ta carbon tax if they know why and where the revenue from the tax is spent. The potential use of tax revenues includes green investment programs, transfers to households or changes in the tax systems such as lowering income or labour taxes. Therefore, earmarking the use of revenues through social protection can increase acceptability.
How about low-income countries?
While this growing evidence seems to converge, one critical gap is that it is based on high-income countries. This gap needs to be addressed for several reasons. First of all, low- and middle-income countries are already representing the majority of emissions. While the main responsibility remains with high-income countries, mitigating emissions in lower income countries in the future is paramount. Second, these countries may have different priorities, which may affect preferences for how to redistribute revenues from carbon pricing. In our study we find that the biggest difference between low- and middle-income countries is that middle income countries consider poverty as a priority. Third, in the wake of the COVID-19 pandemic, social protection schemes are flourishing in low- and middle-income countries, which opens an opportunity to link growing social protection systems to climate policies. Fourth, recent years have been marked by the largest increases in public distrust of governments, businesses, media, and non-governmental organizations (NGOs), as well as a rise in populist movements. This could represent a significant barrier to reaching the goals set under the Paris Agreement.
By using data from 5,000 respondents from over 34 countries (including 10 middle-income ones), we show that vertical and horizontal trust increase acceptability of climate policies in all countries, both industrialized and middle-income ones. However, preferences for social protection have a positive effect only in industrialized ones. This may suggest a contrast between social and environmental goals in lower income countries, where social goals are prioritized. This is supported by the further result that prioritizing poverty reduction has a negative correlation with support for climate policies especially in poorer countries.
To complement our results, a recent study shows that taxes on fossil fuels and carbon taxes with per capita rebates generate 36-38% support in high-income countries but even 48-61% support in middle-income ones. This may further underline that emphasizing that social and environmental goals are complements and not substitutes is critical especially in lower income settings. The same goes for carbon taxes with transfers to the poorest or the most constrained households. This reinforces the point that people care about the distributional implications of policies
Transparent and good policy design is crucial!
Therefore, to implement climate policies in lower income countries and overcome the conflict between social and environmental goals, well-thought-out policy designs need to be implemented. It is clear that communication and information are critical for dealing with misperceptions To increase public support that revenue recycling needs to be made salient, other than in current experiences in high income countries, and social protection programs offer an important platform.
Second, policy sequencing is critical. The suggestion to use antedated cash transfers can also be used to address trust concerns. Here the cash transfer takes place (or is visible in bank accounts) before and not after the carbon tax is implemented. It needs to be checked, however, if such idea is applicable everywhere, especially in the context of informality.
Third, there is the need to invest in social protection in lower income countries to build sustainable and comprehensive systems. The Global Accelerator on Jobs and Social Protection for Just Transitions can be a decisive tool to link social protection with climate mitigation.
Fourth, the issue of fairness need to be dealt with also within in global agreements, and not only within national boundaries. The previously mentioned recent study found that 73% to 93% of people think that climate policies should be implemented at the global level. Therefore, trust in international institutions, as well as fairness and justice criterion used by countries to determine their emission targets.
Finally, it is important to consider the responses to energy prices from the war in Ukraine in this context. Subsidies, such as fuel and food subsidies, were by far the most widely used policy instrument, compared to more targeted measures, especially in low-and middle-income countries. In the long term it is neither financially nor environmentally sustainable to use subsidies to keep prices low. It has been estimated that, by using energy subsidies, it would cost about $12 to transfer $1 of income to households in the poorest quintile. In this context, it is clear that targeted cash transfers are the most effective policy tool to address the impacts, whilst keeping economic incentives for environmental protection. This, however, need well-functioning social protection systems in place
Note: This article gives the views of the author, not the position of the EADI Debating Development Blog or the European Association of Development Research and Training Institutes.
Daniele Malerba is a senior researcher at the German Institute of Development and Sustainability (IDOS). His research focuses on the distributional implications of climate policies and how to address them, with a focus on social protection and poverty. He has co-edited the special issue of the European Journal of Development Research (EJDR) on social protection and social cohesion and moderated it’s online launch event
Image: by Christophe LEUNG under a creative commons licence on Flickr