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Begin New Search Topic Climate Change Author Jeromin Zettelmeyer

1. Building coalitions for climate transition and nature restoration

Author:
Jean Pisani-Ferry, Beatrice di Mauro, and Jeromin Zettelmeyer
Publication Date:
07-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Global climate and biodiversity outcomes will largely be determined in emerging and developing economies (EMDEs). We propose a four-pillar strategy to support climate and nature preservation in line with the economic interests of both developing and advanced countries. This would move beyond voluntary pledges to embed climate and nature objectives into the structures of trade, finance and industrial policy, creating a self-reinforcing system of cooperation and reducing the net costs of the green transition. Under Pillar 1, a coalition of advanced and developing countries would link tiered carbon pricing with a common carbon border adjustment mechanism (CBAM). Pillar 2 would create a climate-finance coalition to decarbonise the power sectors of developing countries. Pillar 3 would involve partnerships to develop clean energy-intensive industrial production stages in developing economies with rich renewables endowments; these would feed into the supply chains of the European Union and other energy-importing advanced economies. Pillar 4 would redesign markets to create scalable and credible mechanisms to fund carbon removals. Technology-based removals can be incentivised through the introduction of clean-up certificates into the EU emissions trading system, while nature-based removals would require improved market design centred on a new asset class: nature shares. The four pillars reinforce each other. A multi-country CBAM and carbon pricing coalition (Pillar 1) would reduce the cost of financing power sector decarbonisation (Pillar 2). Linking EMDE membership of the CBAM and carbon-pricing coalition to financial support for the decarbonisation of power sectors would also make it more attractive for EMDEs to adopt carbon prices. Decarbonisation of power sectors (Pillar 2) would be a precondition for developing clean, highly energy-intensive industry in renewables-rich EMDEs (Pillar 3). The Pillar 1 coalition should include the EU, China and as many other countries as possible. Advanced countries and China could underpin the Pillar 2 financier coalition. Pillar 3 would involve the EU and potentially other energy-poor advanced countries, along with EMDEs that are richly endowed with renewables. Pillar 4 would include the main custodians of the planet’s natural capital. Enabling these coalitions will require EU leadership.
Topic:
Climate Change, Economics, Industrial Policy, Trade, Sustainability, Decarbonization, and Green Transition
Political Geography:
Europe

2. The economic case for climate finance at scale

Author:
Patrick Bolton, Alissa M. Kleinnijenhuis, and Jeromin Zettelmeyer
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
It will be impossible to contain the global temperature rise to 1.5 to 2 degrees Celsius above pre-industrial levels unless emerging market and developing economies (EMDEs) decarbonise much more rapidly. This policy brief examines the economic case for advanced-country financial support for replacement of coal with renewable energy sources in EMDEs. Such conditional financial support is necessary in the sense that an exit from coal consistent with keeping the global temperature rise to between 1.5°C and 2°C will not happen without it, desirable from the perspective of the financier countries, and financially feasible. Although the global economic benefits of phasing out coal are very large, the costs of exiting coal generally exceed the benefits to EMDEs. However, the collective economic benefits to advanced countries greatly exceed those costs. These net benefits are positive even for small coalitions of advanced countries (G7 or G7 plus EU). The fiscal costs of financing the coal exit in EMDEs (without China) are modest as a share of G7+EU GDP at about 0.3 percent of GDP per year, assuming public-sector participation in renewable energy investment costs through blended finance of around 25 percent. Although providing climate finance to EMDEs is economically desirable and feasible from the G7 perspective, it is not happening at the necessary scale, partly because of incentives and political-economy challenges. Advanced countries are more likely to be willing to commit financing to climate action outside their borders if they have more control over how this money is spent. Developing countries are reluctant to phase out coal unless sufficiently large financial support is forthcoming for renewable investments that are consistent with their development goals. These problems could be overcome by tying renewable finance to a coal phase-out. Already-existing Just Energy Transition Partnerships with South Africa, Indonesia and Vietnam are prototypes of this approach. They should be scaled up, with sufficient grants to pay for coal closures and the social transition in coal communities, by explicitly conditioning funding on a coal phase-out and through a stronger governance structure to implement these deals.
Topic:
Climate Change, Emerging Markets, Climate Finance, Renewable Energy, Coal, Carbon Emissions, and Emerging Economies
Political Geography:
Global Focus

3. Rebooting the European Union’s Net Zero Industry Act

Author:
Simone Tagliapietra, Reinhilde Veugelers, and Jeromin Zettelmeyer
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In March 2023, the European Commission published a legislative proposal for an EU response to the US Inflation Reduction Act: the Net Zero Industry Act (NZIA). It is an unconvincing policy proposal, both for what is in it and for what is not in it. The proposal has five problematic aspects. First, it takes a top-down approach, in which specific technologies are selected for preferential treatment. Preferable would be a technology-neutral approach open to all current and future technologies that help tackle the net-zero challenge. Second, its blanket 40 percent self-sufficiency benchmark for EU domestic cleantech manufacturing by 2030 sends a protectionist signal, is poorly defined and does not reflect the differences in EU capacity in the cleantech sector. Third, it relies on the acceleration of permitting procedures as the main policy instrument, although this is not the main obstacle to cleantech investment in the EU. Fourth, it proposes more strategic use of public procurement. While this is an objective to be supported, the specific proposals are likely to be ineffective because of the way they are designed. Fifth and not least, the NZIA would lack a governance structure that would ensure effective implementation. In addition, the NZIA does not tackle three critical issues. It does not address investment obstacles related to failures of the single market. It does not tackle the coordination problem at the core of developing an EU green industrial policy. Finally, it does not develop an EU-level funding strategy, but rather relies on state aid, with the related risk of fragmentation. The European Parliament and EU countries in the Council of the EU should reboot the proposal and refocus its objectives, sharpening its limited instruments, improving its governance, and adding financial incentives to ensure implementation. In parallel, the EU should develop a broader green industrial policy strategy that leverages the single market in a credible manner, building a solid new governance framework and a new EU-level funding approach.
Topic:
Climate Change, Industrial Policy, Governance, European Union, Trade Policy, and Industry
Political Geography:
Europe