NON-PRICE POLICIES FOR ADDRESSING CLIMATE
CHANGE: THE GLOBAL EXPERIENCE
Renu Kohli and Honey Karun*
Centre for Social and Economic Progress (CSEP) Research Foundation
New Delhi, India
1
Executive Summary
This note discusses the cross-country experience on non-price policy measures to lower
carbon emissions. It compiles the array of non-pricing methods adopted by the G20 countries,
with broad classification by sectors and objectives. The sequencing and stringency patterns of
these policy levers along with the impact and implementation experiences are assessed, while
specifying the information gaps. The mapping of non-price, climate policy mitigation
instruments reveals wide variations in deployment across sectors and targets. The note flags
the complexities in assessing the effectiveness of such policies; inter alia, the lack of rich data
on which estimations of expected emission reductions could be based. Hard evidence on
policies and their effects is a critical gap that needs addressing to take ahead climate policy
dialogue and coordination. In the context, the note highlights the ongoing work by the OECD
to develop a Climate Actions and Policies Measurement Framework (CAPMF), as a starting
point for comprehensive information on climate policies.
The following insights merit deliberation and further discussion by countries in the context of
search for the best way forward to involve private sector in the low-carbon transition.
One, a complex interplay of multiple and varied non-price policy levers across sectors points
to challenges of causal interpretations, evaluation, and comparative assessments. Two, the
motivations are often diffused.; this may be to reduce greenhouse gas emissions or another
primary goal that is extremely climate relevant. Three, there is frequent complementarity
with price-based policy measures, where the latter’s support to incentivize behavioural
changes or encourage private investments is noticeable. Four, the adoption of non-price
measures is quite unique amongst countries, pointing to a need to appreciate and adapt price-
based policies in accordance while recognizing the limits to their harmonization. Five,
although many non-price policy levers have existed for long and increased over time
everywhere, the evidence on their efficacy is inconclusive. Six, the challenges to evaluating
the efficiency and impact are complex and several, inter alia, causal inferences due to
multiplicity and variations in responses, quantification difficulties, etc. impede empirical
assessment. Seven, and likewise, the comparative effectiveness with price-based measures in
reducing emissions is complicated. Specifically, the frequent overlap of price- and non-price-
based mitigation instruments makes it extremely difficult to disentangle the contribution of
separate measures to emissions, risks double-counting, amongst major issues.
The note concludes with the need for better understanding about the efficiency of non-price
policy instruments, exclusive and in comparison, with price-based measures. Besides
illuminating possibilities of a policy-mix and associated trade-offs, this is essential to support
international negotiation and coordination on climate policies, competitiveness, and carbon
leakages.
2
I. Introduction
Climate policies have acquired fresh urgency with the changed nature of the global debate on
climate change after the pandemic. A spate of net-zero emission pledges by more than 130
countries, including the world’s topmost emitters, indicates accelerating actions to achieve
these targets. As result, the spotlight is upon the right type and mix of policies which can
reconcile the manifold complexities and trade-offs faced across countries in shifting to a low-
carbon future. The search is for a suitable blend of policy instruments that can balance
competing objectives, i.e., economically efficient, effective, socio-politically acceptable, and
inclusive. Whether market-based or otherwise, the adopted mechanisms to reduce emissions
constitute the environment for potential investment opportunities and risk appraisals.
Investors also seek certainty and assurance about committing capital to sustainable projects
which must also fetch decent returns. In the context, enabling policies that generate market
signals and expectations about the future can facilitate investments in low-carbon alternatives
if strong price incentives are created to reduce emissions in targeted activities.
Against this backdrop, the G20 members, who have almost all pledged net zero emissions
over varying timespans, are keenly examining the set of policy preferences, sequencing
patterns, and different models employed by countries. The clear objective here is to secure
sustainable investments for the low-carbon transition, bulk of which will have to come from
the private sector. The pressure to scale-up actions for implementing the net zero emission
promises is high. Yet, elevated public debts and deficits after the pandemic limit the
resources available for public spending on green investments. Incentivizing participation of
private capital into sustainable projects and support the low-carbon transition with an eye on
individual country circumstances is an important matter for the G20’s deliberation. And the
focus is upon the facilitating role of public policy levers in achieving these objectives.
The broad division is between pricing and non-pricing mechanisms where the former alludes
to carbon pricing. Non-pricing instruments, which endeavour to check the use and efficiency
of products and services causing emissions without assigning a price, are wide-ranging; these
extend from sectoral policies/regulations including subsidies for green projects and finance
incentives to emission disclosures, norms, standards, quotas, and such like. Evidence on their
cost-effectiveness in lowering emissions is formative and unsettled; at best, it is mixed.
1
There’s considerable support for complementarity
2
in pricing and non-pricing tools for
lowering emissions (or more broadly, greenhouse gases), and to assist private enterprise and
capital.
This points to a need for better understanding about their relative impacts and the possibilities
of blending the two in alignment with country-specific context and requirements. Preceding
* Renu Kohli is a Senior Fellow and Honey Karun is an Associate Fellow at the Centre for Social and Economic
Progress, New Delhi.
We gratefully acknowledge the research assistance provided by Saumya Jain, and helpful comments from
Rakesh Mohan and Laveesh Bhandari.
1
Carbon pricing through taxation and ETS is argued to be economically efficient and a cost-effective
instrument for reducing emissions, incentivise shift to cleaner energies, and greater decarbonisation efforts
(ADB 2021, 2022; Parry et.al. 2021, 2022; Dominioni, 2022; Mideska 2021; de Mooij et.al. 2012). Also see
https://unfccc.int/news/calls-increase-to-use-carbon-pricing-as-an-effective-climate-action-tool. Meta-analysis
of studies on carbon policies in the EU finds limited impact of carbon pricing on emissions (Green, 2021).
2
A substantial literature indicates complementarity between pricing and non-pricing instruments (e.g., IPCC
2022; Stiglitz 2019; Stiglitz & Stern 2017; van der Bergh 2021; Peñasco et.al. 2021; Bertram et.al. 2015).
3
deliberations at the G20’s Forum on International Policy Levers for Sustainable Investment
(13 June 2022, Indonesia)
3
have deliberated on these lines, specifically underlining a need for
enhanced insights. Members noted the essential role of non-pricing tools in reducing
emissions even as they concurred that carbon pricing mechanisms were important. The
comparative effectiveness of pricing and non-pricing instruments was regarded necessary to
examine in this light, as also from the standpoint of evolving methodologies to identify
relevant metrics that could further serve as inputs for macro-economic models.
While the choice of tools and pathway adopted is eventually unique and country-specific,
there’s enormous scope to learn from cross-country experiences. Lessons learned in the
design and implementation of non-pricing measures, the challenges faced in crafting policy
mixes, and managing the combination with pricing tools can offer crucial insights to G20
members, both in individual capacities as also instances where joint action towards a
coordinated investment drive is contemplated or may be desirable.
In the above setting, this note discusses the international experience on non-price policy
measures adopted by countries for switching to a low-carbon economy. It is organized as
follows. Section II sets out the exhaustive array of non-pricing methods adopted by the G20
countries, classified by broad sectors and objectives. Section III details sequencing and
stringency patterns, implementation experiences and impact where available, specifying the
information gaps. Section IV concludes.
3
Excerpts from G20 Indonesia, 2022 Presidency Summary. www./https://g20sfwg.org/wp-
content/uploads/2022/07/Presidency-Summary-%E2%80%93-Forum-on-International-Policy-Levers-for-
Sustainable-Investment-%E2%80%93-13-June-2022.pdf.
4
II. Climate policy in G20 countries- an overview
All the G20 members have adopted a broad and diverse set of policy instruments to mitigate
climate impacts and strengthen resilience. There are a large variety of market-based pricing
systems such as carbon pricing, emissions trade mechanisms (ETS), and such like, combined
with numerous non-pricing instruments. Because of the multiple objectives these seek to
achieve, the overlap across sectors is very high (Figure1) – a pointer to how these may
interact in complex ways. To elaborate, price-based instruments such as grants and subsidies
are commonly employed in various sectors as incentives to reduce emissions, promote
energy-switching and efficiency, and encourage sustainable mobility in conjunction with
non-price-based tools such as standards and norms relating to technology, performance,
disclosures, amongst others. In general, these constitute a complementary strategy for climate
mitigation in all countries.
Figure 1. Non-pricing policy levers are a complex network across sectors and purposes.
Note: AFOLU- Agriculture, Forest, and Land use obligations.
5
An attempt is made here to compile the many types of non-pricing measures used to check
carbon or more broadly, greenhouse gas emissions (GHGs) across countries. The listing is
not definitive, but sufficiently comprehensive to underscore their wide prevalence across
different sectors, the typical attributes, and different reasons for which these are deployed
worldwide. The exercise also demonstrates the difficulties associated with measuring or
quantifying the impact of non-pricing measures upon containing emissions, and how these
compare with carbon-pricing and other pricing tools. The following sub-sections classify and
describe such tools across sectors, the policy mix of pricing and non-pricing mechanisms,
followed by a brief country-specific profiling.
II.1 Non-pricing levers across sectors
Panel 1 depicts a distribution of the diverse range of climate-related non-price-based policies
across different sectors amongst the G20 countries. This reveals dominance of overarching
non-pricing levers such as setting GHG reduction targets, and support for research and
development (R&D) for low-carbon activities in the hierarchy of preferences across the board
(Chart 1.1). Most countries (80 percent) employ these tools across various sectors, and they
feature as part of an overarching climate strategy in 15 countries. More than three-fourths of
the members support R&D for low-emission or emission reduction technologies through
funding, action plans, and other non-price measures. All countries have prioritized emission
reductions and energy efficiency improvements across power, industry, buildings, transport,
and agriculture & forestry sectors. These are not the only non-price instruments used though,
as supplementary price-based and other methods are commonly observed as well.
A brief elaboration of the sector-specific non-pricing levers in existence is given below.
The Electricity and heat segment is characterized by a lead role for renewable energy
targets, supplemented with fuel taxes. The sector has the most diverse set of non-price tools
in use with equally expanded coverage. This is understandable as energy serves as the key
input for all users, producers, or consumers in any economy. 80 percent of the countries have
support mechanisms for non-renewable or low-carbon alternatives (options such as nuclear
and hydrogen-based technologies), which can combine pricing and non-pricing tools;
schemes to incentivize increasing the share of renewables, facilitate grid integration, as well
as direct public investments; and policies for energy efficient power plant stock to prepare for
the phase-out of inefficient power plants. A lesser number (14 countries) use renewable
energy targets for electricity or have undertaken grid infrastructure development, instituted
electricity storage policies for developing grids and storage, and allow installation of
renewable electricity, such as solar PV and wind, in the system. And only three countries
(Canada, European Union, and Russia) have introduced phase-out plans for coal and oil in
this sector (Chart1.2).
Industry The key mechanisms employed for industrial decarbonization are also a mix of
pricing and non-pricing instruments. Other than target-setting to reduce emissions, one set of
measures relates to incentives for lowering specific gases (Chart 1.3) along with technology
support to develop alternate options for carbon dioxide removal (e.g., Bioenergy with Carbon
Capture and Storage (BECCS), Direct Air Capture with Carbon Storage (DACCS, etc.). To
better energy efficiency of industrial output, 80 percent of the countries have adopted non-
pricing tools such as energy reporting, audits, and other support systems for CCS, fuel switch,
reducing CH4, N20 and other fluorinated gases. Three-fourths of the countries have instituted
performance and equipment standards, along with schemes for renewables that encourage or
impose usage of renewables.
6
Buildings Setting of standards, codes, materials, and energy efficiency requirements to
reduce carbon emissions are the major non-pricing instruments in use in the building sector.
These are usually combined with price-based measures such as energy taxes. Sixteen
countries have also set performance and equipment standards for bettering energy efficiency
in appliances, with building codes and mandatory certification requirements to lower
emissions from construction activities (Chart 1.4).
Transport Countries have mostly employed taxes to contain transport-related emissions,
with 80 percent taxing fuels. Non-price levers consist of emission and efficiency norms for
vehicles, and performance standards for carbon emissions: 70-75 percent of the countries
have instituted emission standards for vehicles, which are combined with supportive policies
such as investments in public transport, incentives for the use of electric vehicles for light-
duty transportation, and use or switch to low-emission mobility modes including use of
biofuels (Chart 1.5).
Agriculture and forestry sector Typical climate policy tools used here are laws, standards,
incentives, and support for sustainable farming. The non-pricing instruments concentrate
upon encouraging reduction in deforestation and enhancing efforts for reforestation and
afforestation activities. The measures are distinguished by incentives in three-fourths of the
countries, with few more (80 percent) setting standards for sustainable products and
production (Chart 1.6).
Regulatory measures in financial sector – In addition to above, the need to incentivize
larger fund flows into green and climate-friendly activities, and limit environmental risks as
part of climate mitigation, financial disclosures have gained primacy. The Financial Stability
Board’s Task force on climate-related financial disclosures (2017) recommended a
standardised framework aligning multiple regulatory frameworks across countries, on which
the International Sustainability Standards Board (2022) is currently deliberating. All G20
members have introduced Environment, Social, and Governance (ESG) reporting and
disclosure norms. For instance, UK Financial Conduct Authority (2020) rules; the Companies
Regulations (2022) under the Companies Act (2006); and the Limited Liability Partnerships
Regulations (2022) require climate related disclosures on comply or explain basis in line with
recommendations of the task force on such disclosures. US also issued an executive order in
2021, on coverage of climate related financial risk by financial regulators, public
procurement, public financial management, and budgeting processes. The EU Sustainable
Finance Disclosures Regulations (2022) set technical standards for financial market
participants for information disclosures. China also passed regulations in 2021 to standardise
its processes for legal disclosure of corporate environmental information. India introduced
National Voluntary Guidelines (NVG) (2011) on Social, Environmental and Economic
responsibilities of Businesses for adoption by the listed Indian companies including banks
followed by several refinements on various elements of ESG related disclosures by the
Securities and Exchange Board of India (SEBI) until recently expanding the coverage and
scope of climate related financial disclosures.
7
Panel 1. Non-pricing tools across sectors by G20 countries /1
GHG reduction targets, R&D support dominate overall
Targets, taxes, other support for green energies leads electricity sector
8
Pricing, taxes, financial incentives, technology support key mechanisms for industrial
decarbonization
Standards, codes, materials and energy efficiency to lower building sector emissions
0 2 4 6 8 10 12 14 16 18
Urban planning strategies
Building codes and standards as well as support for
highly efficient construction
Performance and equipment standards as well as
support for highly efficient appliances
Support scheme for heating and cooling
Support scheme for hot water and cooking
Energy and other taxes
Number of countries
Chart 1.4. Policies for buildings sector
9
/1: See Annex for a description of the database.
Taxes, with emission & efficiency norms, performance standards mostly cover transport emissions
Laws, standards, incentives with sustainable farming support in agriculture and forestry
Source: Author’s compilation from climate policy database
0 2 4 6 8 10 12 14 16 18
Urban planning and infrastructure investment
Energy/emissions performance standards or support
for energy efficient light-duty vehicles
Energy/emissions performance standards or support
for energy efficient heavy-duty vehicles
Support scheme for biofuels
Support for modal share switch
Support for low-emissions land transportation
Tax on fuel and/or emissions
Number of countries
Chart 1.5. Policies for land transport sector
0 2 4 6 8 10 12 14 16 18
Standards and support for sustainable agricultural
practices and use of agricultural products
Incentives to reduce CO2 emissions from agriculture
Incentives to reduce CH4 emissions from agriculture
Incentives to reduce N2O emissions from agriculture
Incentives to reduce deforestation and enhance
afforestation and reforestation
Sustainability standards for biomass use
Number of countries
Chart 1.6. Policies for agriculture and forestry sector
10
II.2 How Pricing and Non-pricing measures complement each other
A pictorial mix of two sets of policy instruments, pricing and non-pricing, is given in Panel 2.
This highlights the complementarity that exists across countries for checking GHG emissions.
Fiscal and other financial incentives (price-based measures) are commonly deployed along
with a wide range of non-pricing methods as part of the overall climate policy framework in
all countries. Non-pricing interventions are of diverse nature, e.g., public information and
education, regulations, research and development, rules for procurement, along with
voluntary methods. Regulatory instruments, grant, subsidies, and other fiscal incentives are
more evenly distributed across the various segments for reducing carbon emissions relative to
voluntary approaches, and research development (Chart 2.1).
Fiscal and financial incentives abound with as many as 406 grants and subsidies across
twenty countries as on date, along with 212 tax relief measures. At the opposite end of the
spectrum are user charges, GHG emission allowances, GHG emission reduction crediting and
offsetting mechanisms and the removal of fossil fuel subsidies where only Mexico and Saudi
Arabia have introduced explicit policies
4
.
Information and education (non-pricing provisions) numbered 285 with enabling advice or
aid in implementation (183) as the most popular in this genre. Some of the latter include
home performance with energy stars (United States, 2002), smart metering implementation
programme (United Kingdom, 2010), energy checks for private households (Germany, 2012),
amongst others. In comparison, labelling, certification, and professional training and
qualification provisions are less than a third of these. This possibly indicates a lower
stringency of non-price methods for raising public awareness.
The policy support measures span numerous climate targets with 645 such as part of
strategic planning. These consist of procurement of energy efficient appliances for
government enterprises (India, 2013), a national energy policy (India, 2017), energy
conservation and CO2 reduction actions by government (Japan, 2007), ForestAR 2030
(Argentina, 2018), as some examples. There are 146 measures to create relevant and new
institutions for sector-specific requirements such as the Clean Energy Regulator Act in
Australia (2011), the Offshore Oil and Gas Authorities Group of the EU (2012),
establishment of the Non-food Biomass Feedstock Standardization Technical Committee in
China (2012), the Amazon Fund of Brazil (2008), Managing Agency for the Reduction of
Emissions from Deforestation and Degradation of Forest and Peat lands in Indonesia (2013),
the National Green Tribunal Act in India (2010), and such like as major non-pricing
initiatives (Chart 2.4). Formal targets that are legally binding, e.g., energy, efficiency,
emissions, etc. are fewer in contrast.
Public procurement includes instruments such as infrastructure investments (139),
procurement rules (48), and funds to sub-national governments for climate resilient projects
at provinces, territories, and local authorities’ levels across sectors (54) (Chart 2.5).
Illustratively, non-pricing policies such as procurement rules include government purchase
standards (UK, 2011), Legislation to promote purchases of environmentally friendly products
(Republic of Korea, 2010), Energy Efficiency in Government Operations (Australia, 2006),
amongst others.
4
Fuel price adjustments (subsidies removal) Saudi Arabia (2017) act to increase gasoline prices (cut subsidies
for full-price parity with international ones between 2018-2025; raise diesel prices (cut subsidies) to 90%
international prices in same period. Mexico’s new energy reform law on hydrocarbons intends eliminating
gasoline subsidies and promote substitution of oil energy sources by natural gas.
11
In terms of their frequency of use or application for emission reductions, regulatory
instruments are the broadest range worldwide. Such levers include monitoring (139),
product standards (127), sectoral standards (135), building codes and standards (103), vehicle
fuel-economy and emission standards (112), and so on (Chart 2.6). To encourage low-carbon
and low-emission alternatives, technology deployment and diffusion measures are in wide
use (111 measures), matched by technology development and demonstration projects (Chart
2.7). Funding support and related measures for research and development are fairly even at
80 such, while research grants are a distant 6 in number.
Finally, voluntary approaches are also an established non-pricing method to reduce
emissions. The most common here are negotiated agreements between private and public
sector, of which there are 126 in all (Chart 2.8). Some examples are the motor challenge
programme (EU, 2003), Quebec voluntary agreement with aluminium industry (Canada,
2002), action plan to reduce greenhouse gas emissions from aviation (Canada, 2012), green &
smart transportation partnership (Republic of Korea, 2012), and the 50001 ready programs
(US, 2017).
12
Panel2. Distribution of type of non-pricing policy instruments in G20 countries /2
0 200 400 600 800 1000
Agriculture and Forestry
Buildings
Electricty and heat
Industry
General
Transport
Chart 2.1. Instruments across sectors
Research, Development and
Deployment
Voluntary Approaches
Regulatory Instruments
Procurement and investment
Policy Support
Information and Education
Grant, subsidies, and other
financial incentives
406
212
23
65
40
38
30
18
6
12
15
2
Frequency
Chart 2.2. Fiscal and other financial incentives
Removal of fossil fuel subsidies
User charges
Retirement premium
Economic instruments (other)
Net metering
Tendering schemes
GHG emissions allowances
GHG emission reduction crediting and
offsetting mechanism
Fiscal or financial incentives (other)
Loans
Tax relief
Grants and subsidies
13
285
183
51
64
35
19
35
11
19
Frequency
Chart 2.3. Information and education
White certificates
Performance label (other)
Green certificates
Information and education (other)
Professional training and qualification
Comparison label
Endorsement label
Advice or aid in implementation
Information provision
645
146
68
53
67
40
33
29
23
20
5
14
9
19
10
2
3
Frequency
Chart 2.4. Policy support measures
Climate strategy (other)
Energy efficiency target (other)
Target (other)
Coordinating body for climate strategy
Renewable energy target (other)
Formal & legally binding energy efficiency
target
GHG reduction target (other)
Political & non-binding energy efficiency target
Formal & legally binding GHG reduction target
Formal & legally binding climate strategy
Formal & legally binding renewable energy
target
Political & non-binding renewable energy target
Political & non-binding GHG reduction target
Political & non-binding climate strategy
Policy support (other)
Institutional creation
Strategic planning
14
139
48
54
12
Frequency
Chart 2.5. Public procurement
Direct investment (other)
Funds to sub-national governments
Procurement rules
Infrastructure investments
12
139
127
135
71
103
112
89
68
38
19
15
4
Frequency
Chart 2.6. Regulatory instruments
Vehicle air pollution standards
Industrial air pollution standards
Grid access and priority for
renewables
Codes and standards (other)
Auditing
Obligation schemes
Vehicle fuel-economy and emissions
standards
Building codes and standards
Regulatory Instruments (other)
Sectoral standards
Product standards
Monitoring
Other mandatory requirements
15
/2: White certificates promote energy efficiency through flexible mechanisms, including trading energy savings
by energy firms. Green certificates require energy suppliers to have a certain share of renewable production in
their supply portfolio. Comparison labels are often used in buildings sector to compare and improve energy
efficiency ratings. Endorsement label indicates that a product meets specified criteria of energy efficiency
Source: Author’s compilation
111
102
110
80
69
6
Frequency
Chart 2.7. Research, Development and Deployment
Research programme (other)
Research & Development and
Deployment (RD&D) (other)
RD&D funding
Demonstration project
Technology development
Technology deployment and diffusion
126
28
16
9
Frequency
Chart 2.8. Voluntary approaches
Unilateral commitments (private
sector)
Voluntary approaches (other)
Public voluntary schemes
Negotiated agreements (public-private
sector)
16
II.3 Country-wise coverage of non-pricing instruments
Targets to be achieved through non-pricing instruments are ambitious as detailed in the
Annex (Table1) For instance, Australia’s Building Energy Efficiency Disclosure Act aims to
deliver more than $50 million in energy savings, and approximately 3.5 million tonnes of
emission reductions over five years. In China, the implementation plan for carbon peaking in
urban and rural construction aims at new public buildings and factories in towns and cities to
have 50% coverage with solar panels by 2025. The RePower EU plan and Save Energy
Communication targets an increase from 9% to 13% of the binding energy efficiency target
under the ‘Fit for 55' package in the EU. Presidential regulation in Indonesia mandates a
target of 23% new renewable energy in the national energy mix by 2025 and a 1% reduction
in energy intensity per year. The UK targets 2GW of low carbon hydrogen production
capacity in operation or construction by 2025, while the US has a target of zero GHG
emissions from the portfolio of federal buildings, cars and trucks by 2050.
A brief country-specific profile of non-pricing instruments across the major sectors is given
below. Overall, such mechanisms either reflect, and/or correspond to the respective economic
structures and specific vulnerabilities to climate change, which are unique for each country.
This beside, there are several common features in the use of non-pricing levers across
countries: inter alia, the energy transition from fossil fuels to clean, renewable alternatives is
structured around target-setting, carbon-emission and energy-efficiency norms, codes and
performance standards cutting across users (industry, transport, buildings, etc.); there are
relatively fewer measures aimed at industrial decarbonization, which are not universal and
clustered around norms/standards/other regulations for energy-efficient production and lower
gaseous emissions; an exclusive deployment of non-pricing methods for containment of GHG
emissions, preservation of green cover, and adoption of sustainable farming in agriculture,
land use and forestry sectors
5
; while codes, standards, materials efficiency, amongst other
non-pricing tools are comprehensively deployed for checking emissions in buildings.
Argentina has the maximum policies in practice for the electricity and heating segment (18)
where the majority provide support for renewables. Transport and agriculture and forestry are
next in the hierarchy. In transport, the policy focus is directed towards setting standards for
vehicles regarding energy and emissions, supplemented with support mechanisms for low
emission land-transportation and biofuels. Agriculture and forestry policies set relevant
standards and provide support for sustainable farming practices, incentives for reforestation,
and reduction of activities leading to deforestation.
Australia has general climate policies with broad coverage of support mechanisms for
research and development of low- and -negative carbon emissions technologies that help in
the transition to a low carbon economy (10). It also has the most coverage with industry-
focused policies (20) that are evenly distributed across material efficiency (4), energy
efficiency of production (4), energy reporting and audit (3). Support measures for renewables
and non-renewable, low-carbon alternatives are the main ones in electricity and heating, with
nearly a dozen measures in buildings and transport sectors.
Brazil’s key focus sectors are transport (23 measures) and agriculture and forestry (22). In
transport, support schemes endeavour to encourage biofuels, coupled with standards for
5
This is explained by the fact that animal and agricultural greenhouse gases are hard to quantify, making it
difficult to implement price-based measures. https://environment.govt.nz/publications/review-of-climate-
change-policies/4-policy-choices/4-3-non-price-and-supplementary-price-measures/, Ministry for the
Environment, New Zealand.
17
energy/emission performance and support for energy efficient vehicles. The thrust in
agriculture and forestry is to combat deforestation (reduction) and enhance reforestation, for
which it has 14 non-pricing instruments. Efforts in the electricity and heat sector concentrate
on support schemes for renewables and non-renewable or low-carbon alternatives. The
measures in the industry sector majorly focus on energy efficiency in industrial production
through programmes like Alliance Program for Energy Efficiency (2019).
Canada has the maximum measures for electricity and heating, and industry at 31 each. The
general measures covering all sectors number close with support mechanisms for low-
emissions and negative emissions R&D, as well as GHG reduction targets. The industry
sector policies also focus on schemes for renewables (6), support for energy efficiency in
production (5), incentives to reduce F-gases (4), reduce CH4 from fuel exploration and
production (5). In the electricity and heat sector, the measures relate to renewable and non-
renewable as well as low carbon alternatives.
China’s climate policy space is dominated by electricity and heat sector with as many as 51
non-pricing measures in place; these cover support schemes on renewables and non-
renewable carbon alternatives (38). To reduce industrial emission, there are 35 measures
relating to performance and equipment standards, energy efficiency in production, and a
strategy for material efficiency. Such measures in transport sector relate to performance
standards for energy/emissions, energy efficient vehicles, and low-emission land
transportation.
The European Union has broad overarching non-pricing policies (29) with near-similar
industry coverage (24), followed by electricity (18). The general policies support low
emissions and negative emissions R&D, set GHG reduction targets, climate strategies,
amongst some. Non-pricing tools for industry are structured around performance and
equipment standards, energy efficiency in production, incentives to reduce landfill CH4, and
strategy for material efficiency. Renewables and renewable energy targets, and highly
efficient power plants are supported with non-pricing methods in electricity and heating.
France has the most non-pricing measures for electricity and heating sectors to support
renewables (67), and non-renewable low carbon alternatives (48), and that for highly efficient
power plant stock (12). There are 40 non-pricing tools in the transport segment relating to
low emission land transportation (17) and support scheme for biofuels (8). Finally, there are
19 broad measures governing low emission and negative emissions R&D.
Germany has the most non-pricing mechanism for electricity and heating (48) followed by
transport (27) and general policies spanning across sectors (24) to lower carbon emissions
and R&D for negative emissions. 31 schemes support renewables, non-renewables and low-
carbon alternatives, with 10 for highly efficient power plant stock. Transport sector measures
are evenly distributed between support schemes for low-emissions land transport (8),
energy/emissions performance standards and adoption of energy efficient vehicles (6), and to
encourage biofuels (6).
India has the largest set of non-pricing mechanisms in the electricity and heating sector with
44 policies, focusing on supporting renewables (25). In the industrial sector, the push has
been given to energy efficiency by incorporating standards in industrial production. In the
building sector, India has a balanced approach with a policy focus on both building codes (3)
and performance standards for appliances (10). In the transport sector emission standards for
18
light (6) and heavy-duty vehicles (4) exist along with policies encouraging the use of biofuels
like the Biofuel Purchase policy (2006). In the agriculture and forestry sector, the focus is on
forest protection and afforestation with 13 policies that regulate their use. Policies regarding
strategic planning for sustainable agriculture like the National Mission on Climate resilient
agriculture (2011) are also in force.
The United States has many measures in electricity and heating (74) with a focus on
renewable energy through support schemes (29) including fiscal and financial incentives.
Industrial decarbonization occupies next preference with focus on enhancing production
energy efficiency (8), performance and equipment standards, lowering various emissions
(CH4, N2O, and fluorinated gases). Measures in buildings sector are trained on performance
and equipment standards for appliances (12) over that for building codes and standards (2). In
transport sector, emission standards for light and heavy-duty vehicles exist; there are also
mechanisms to promote bio-fuels usage (e.g., Biodiesel blending tax credit (2020) along with
multiple other schemes. In agriculture and forestry, the focus is upon sustainable agricultural
practices (6) and limiting deforestation coupled with afforestation efforts (5).
Russia has the largest set of non-price mechanisms for electricity and heating (13) focusing
upon renewables’ support. Industry measures relate to increasing energy efficiency, energy
audits and accounting (e.g., energy passports that capture relevant information). In buildings,
non-price interventions relate to ensuring efficiency via codes and standards. Emission
standards for light and heavy-duty vehicles, and promotion of low-carbon transport through
modal shift (3) and electric vehicles and hydrogen fuel use cover the transport sector. Finally,
there are two non-price policies covering agriculture and forestry to assist protection and
afforestation.
Saudi Arabia focuses most upon electricity and heating with 17 measures comprising
support schemes and targets to promote renewables. Energy-efficient production and
equipment standards govern measures in the industrial sector while in building, codes and
equipment standards are aimed at low-carbon intensive infrastructure development. Emission
checks from light duty vehicles along with emission standards and promotion of public
transport cover the transport sector. In agriculture and forestry, sustainable agriculture
practices, forest conservation and afforestation efforts are covered by non-pricing methods.
South Africa has the most non-pricing tools for electricity and heating (11 policies), with 7
relating to renewable energy support. In industry, 5 measures cover energy efficiency in
production, coupled with energy reporting and audits, and reducing consumption and
production of hydrofluorocarbons (viz. Kigali Amendment). Building codes and standards,
low energy intensity in appliances through equipment standards, exist in the building sector.
Transport sector emissions are sought to be contained through low carbon transport, emission
standards, vehicle labelling, urban transport planning, and mandatory biofuel blending
regulations. In agriculture and forestry, the policy focus of non-pricing methods has been on
reducing deforestation and promoting afforestation (4).
Turkey has the most (16) measures in the form of support schemes for renewable energy and
grid infrastructure development in electricity and heating sector. Non-price methods in
industry are structured around increasing energy efficiency of production, equipment
standards, energy reporting/audits, and controlling fluorinated gases through the Kigali
Amendment. In the building sector, standards and codes are deployed while transport
emissions are sought to be checked by setting energy/emission standards for light (2) and
19
heavy-duty vehicles (2), supported by policies to promote modal shifts (5). In the agriculture
and forest sector the policy focus has been on both through support schemes for sustainable
agriculture (4) and avoiding deforestation and promoting afforestation (7).
The United Kingdom has 35 policies in transport sector focusing on low emission
transportation (19) through electric vehicles, charging stations, cycling, and walking; light
and heavy-duty vehicle emission standards along with policies promoting biofuels
complement these. Electricity and heating is covered with 18 non-pricing policies with major
focus on support scheme for renewables (13). In industry, measures cover energy efficiency
of production, equipment standards, energy reporting/audits, and reduction of fluorinated
gases. Building standards and codes, appliance standards, and efficient materials exist for
buildings sector while agriculture and forestry sector are covered by encouraging measures
for sustainable farming, reducing deforestation and afforestation.
Indonesia has the largest number of non-pricing tools for agriculture and forestry (32)
followed by electricity and heating in which renewables’ support dominates (19). As in other
countries, industrial sector non-price methods focus on energy-efficient production,
equipment standards, energy reporting/audits, and reducing CH4 in fuel exploration/
production. In buildings, there’s equal policy focus on building standards/codes and
appliance standards. The transport sector has energy/emission standards for light (4) and
heavy-duty vehicles (2), policies promoting a modal shift (5), and policies pushing for
biofuels (5). As mentioned earlier agriculture and forestry are the most policy focused with
25 policies to avoid deforestation and promote afforestation along with 4 policies on
sustainable agriculture. Indonesia also has policies to ensure sustainable use of biomass (3).
Italy has as many as 28 non-pricing levers in electricity and heating, with 21 support schemes
for renewable energy. Industry emissions are checked by non-price-based measures for
improving energy efficiency of production while building standards and codes, and appliance
standards for efficiency are in use in the buildings sector. In transport, such measures are
used to promote biofuels (6) and green infrastructure (3). A single measure the Fund for GHG
emissions reduction and energy efficiency (Finance Law 2001) is there to discourage
deforestation and increase afforestation in agriculture and forestry sector.
Japan has the largest number of policies in transport with as many as 34 policies with a focus
on low emission transport complemented by vehicle standards and policies supporting
biofuels. The non- pricing policies in electricity and heating have prioritised support schemes
for renewable energy (7). In the industry sector the policy focus is on energy efficient
production (7) along with energy reporting and equipment standards. Building standards and
equipment standards for energy efficient appliances exist in the building sector. In the
agriculture and forestry sector the policy focus is on sustainable agriculture (6) and reducing
deforestation with afforestation efforts.
Mexico’s non-pricing policies for electricity consist of renewable energy support schemes,
while that in industry relate to energy efficient production coupled with incentives to reduce
CH4 from fuel exploration. The buildings sector is the weightiest with 22 measures referring
to codes, norms, performance and equipment standards. Transport sector has energy/emission
standards for light and heavy-duty vehicles, low emissions land transport focusing on electric
mobility. In agriculture and forestry, the policy focus is on sustainable agriculture,
conservation and afforestation.
20
Korea has an extensive coverage on electricity and heating sector with 17 support schemes
for renewables and non-renewable low carbon alternatives. The policies in the industry
targets energy efficiency (7) and integrating renewables (5) in the production process and
reducing industrial waste. In transport policy measures focus on low-emission models for
land transportation (6), support schemes for biofuels (5) and some degree of energy/emission
standards for light (2) and heavy-duty vehicles (1). The general policies support RD&D for
lower and negative emissions (7) and overall GHG reductions. The buildings sector policies
are concentrated on setting performance and equipment standards, building codes through
supporting usage of efficient appliances, and efficient construction (10).
The above mapping across the twenty countries reveals wide variations in sectors and targets
in the deployment of non-price mitigation instruments. It is not surprising therefore that the
effects are found to vary substantially across sectors and policies (IMF-OECD, 2022).
Assessment of their effectiveness is complicated by the lack of rich data on which estimations
of expected emission reductions could be based. Ongoing work by the OECD in this regard is
focused on developing a Climate Actions and Policies Measurement Framework (CAPMF), a
starting point for comprehensive information on climate policies; this would be accompanied
by mapping these policies to the emission base in order to show the sectors covered by the
policy instruments and how much of the emissions in the particular sector they cover. The
OECD has already carried out a similar exercise covering the key price-based carbon policies
(the Effective Carbon Rates dataset). Hard evidence on policies and their effects is a critical
gap that needs addressing to take ahead climate policy dialogue and coordination. This is also
crucial to alleviate concerns about competitiveness losses, increase and/or establish trust, and
lower risks of implementation and breaches.
21
III. SEQUENCING, STRINGENCY AND EXPERIENCE
This section attempts to evaluate the experience with non-pricing policies. Because of the
multitude of measures that exist to check carbon emissions, standalone or in conjunction with
pricing tools, the complex interlinkages across sectors and measures make it difficult to
quantify the relative impacts or compare with carbon- and other pricing interventions. As the
preceding section showed, there’s no country that does not fit this characterization. These are
also key reasons why there are few comprehensive assessments that exist at present in this
regard. Acknowledging these constraints, an attempt is nevertheless made here to enhance
understanding to the extent possible.
III.1 Sequencing
In the last three decades, countries have introduced climate-related non-pricing tools in a
pattern that is often unique rather than being universal. The broadest visible trend is a steady
increase in the number of such measures in the last two decades relative to that in the
nineties, although the peaks vary across countries. Likely, this corresponds to the steady
increase in climate-related events and evidence, heightening awareness and concerns
translating into agreements for urgent actions to restrict the rise in global temperatures in
recent years.
A snapshot profile of their evolution across countries and mitigation spheres is presented in
Panel 3 (table and charts). It can be seen the advanced economies’ group (AEs) significantly
scaled up the number of non-price-based measures in 1991-2010, after which further
additions moderated in 2011-22; nonetheless, the increase in number of non-price tools in the
past one decade is more than double that in two decades to 2010. Emerging and developing
economies (EMDEs) on the other hand, display an evenly distributed rise in such policies in
the same three-decade period although the numerical evolution in aggregate tracks that of the
AEs. Nevertheless, AEs as a group have more policies in practice than the EMDEs amongst
G20 countries (Table 3.1). This may possibly reflect lags and/or lesser urgency or stringency
in emission checking measures.
There are some within-group variations. For instance, the US, France, Germany and EU
introduced the most measures in 2001-2010, a three-fold increase over the previous decade;
however, the UK and Japan display similar increases in the post-2000 period or two decades.
Likewise, India, Indonesia, China, Argentina, Mexico, and Russia from the EMDEs had very
few measures (in single-digits, or 2-7) in the nineties, but ramped these substantially in the
following decade, peaking in the most recent one. Other EMDEs, e.g., South Africa and
Korea, display a discrete increase in this millennium that has sustained, while Saudi Arabia
appears to have continued adopting non-pricing levers to date.
The interesting aspect is the concentration of policies across G20 countries (Chart 3.1) in
which there is a visible incline towards energy efficiency and a push for renewables cutting
across the advanced, and emerging and developing economies alike. It is equally important to
note that most countries have combined these with some form of carbon tax (Chart 3.2) apart
from four countries, viz., Brazil, India, Indonesia, and Saudi Arabia.
22
However, indirect carbon price interventions such as fuel taxes and coal cess (as opposed to
direct ones like carbon taxes and emission trading) are employed in India; according to the
OECD, fuel excise taxes, an implicit form of carbon pricing, covered 54.7% of emissions in
2021 (unchanged since 2018), whereas fossil fuel subsidies covered 2.5% of emissions at the
same point.
6
6
Fuel excise taxes, an implicit form of carbon pricing, cover 54.7% of emissions in 2021, unchanged since
2018. Fossil fuel subsidies cover 2.5% of emissions in 2021, unchanged since 2018. Pricing Greenhouse Gas
Emissions, Country Notes, India, OECD, 2022.
Panel 3. Policy sequencing in G20 countries
Table 3.1. Number of Policies
Countries
1991-2000
2001-2010
2011-2022
Argentina
7
25
60
Australia
40
121
111
Brazil
19
51
46
Canada
37
156
113
China
6
83
116
EU
32
102
73
France
36
107
66
Germany
34
105
71
India
6
72
126
Indonesia
4
61
74
Italy
21
70
31
Japan
36
80
80
Mexico
4
33
77
Korea
13
74
60
Russia
2
24
34
Saudi Arabia
0
10
19
South Africa
1
44
41
Turkey
9
35
53
UK
16
94
88
US
82
240
91
Adv. Eco. (excl.EU)
315
1047
711
EMDEs
58
438
646
EU
32
102
73
23
Source: Author’s compilation
0 100 200 300 400 500 600 700
energy efficiency
energy service demand reduction and
resource efficiency
low carbon tech and fuel switch
renewables
non-energy use
Chart 3.1. Policy concentration across mitigation areas
Advanced Economies
(excl. EU)- 2011-2022
Advanced Economies
(excl. EU)- 2001-2010
Advanced Economies
(excl. EU)- 1991-2000
EU -2011-2022
EU -2001-2010
EU -1991-2000
Emerging Market and
Developing Economies-
2011-2022
Emerging Market and
Developing Economies-
2001-2010
Emerging Market and
Developing Economies-
1991-2000
France, 1999
Italy, 2004
Germany, 2006
Canada, 2007
Russia, 2008
South Africa, 2010
UK, 2011
Japan, 2012
Australia, 2012
Mexico, 2014
Korea, 2015
Argentina, 2017
China, 2017
EU, 2017
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Number of countries sequenced over year of introduction of carbon tax
Chart 3.2. Introduction of Carbon Tax
24
III.2 Experiences with non-pricing mechanisms for greenhouse gas emissions
At first sight, there appears little correlation between country scores on different metrics of
performance – GHG emission, renewable energies, and energy use – and climate policies as
per the Climate change performance index tracking 63 countries (Table 1). In 2023 for
example, the index ranked India 8
th
, followed by UK at 11 and Germany at 16
th
position.
While it is of course, extremely superficial to interpret these correlations considering the
complex combination of price- and non-price-based mechanism for controlling GHG
emissions that in turn, are a function of different mix of economic activities and structures,
the country-specific geographical and other climate-related vulnerabilities, respective
emission levels might shed some light on the mixed outcomes on key aspects of climate
policy observed here. Within the G20 for example, AEs such as the US, Japan, Australia,
Canada, and Korea are some of the worst performers, and hence, at the bottom of the pyramid
while considerably increasing non-price tools in three decades as documented before.
Table1. Climate Change Performance Index, 2023
Country
Overall
Rank
Overall
score
GHG
emissions
score (40%) *
Renewable
energy score*
(20%)
Energy use
score*
(20%)
Climate policy
score* (20%)
India
8
67.4
29.7
7.8
16.0
13.9
UK
11
63.1
30.4
6.4
16.4
9.9
Germany
16
61.1
27.4
6.8
13.8
13.2
EU
19
60.0
24.9
7.7
13.3
14.0
Indonesia
26
54.6
21.0
11.1
13.2
9.4
France
28
53.0
26.5
5.0
13.2
8.3
Italy
29
52.9
22.8
6.9
13.9
9.3
Mexico
31
51.8
26.5
2.4
16.0
6.9
Brazil
38
48.4
20.6
11.5
14.7
1.7
South Africa
44
45.7
20.1
3.2
15.2
7.3
Turkey
47
43.3
21.9
10.3
10.7
0.5
Argentina
49
41.2
17.9
4.0
15.4
3.9
Japan
50
40.9
19.9
4.6
13.0
3.3
China
51
38.8
11.6
9.6
6.0
11.7
US
52
38.5
14.2
2.7
8.0
13.6
Australia
55
36.3
18.4
2.9
7.4
7.5
Canada
58
26.5
10.5
3.3
4.5
8.3
Russia
59
25.3
15.2
1.3
8.9
0.0
Korea
60
24.9
10.5
3.5
5.9
5.0
Saudi Arabia
62
22.4
6.4
5.8
6.0
4.2
Source: Climate change performance ranking 2023, German policy watch.
Note: * weights of each indicator in overall score
More specifically, measuring the relative impact of pricing and non-price-based methods is a
well acknowledged challenge at all levels including multilateral agencies. The most recent
examination by the OECD and the IMF late last year (2022) identifies the various challenges
in such assessments and comparisons across policies and countries, the outstanding one being
the complex interactions amongst the two sets of policies (price and non-price-based). The
analysis suggests that price- and non-price-based instruments emit different signals to market
participants through changes in the prices of activities or assets, and/or constraining activities
or investment in assets to comply with regulatory requirements. Thus, the report establishes a
need for developing an operational methodology on potential metrics to facilitate comparison
and estimating the impact of non-pricing policies on overall emissions.
25
The OECD’s existing recent work
7
in this regard finds that pricing mechanisms, which do
affect emission reduction are nonetheless insufficient to meet net-zero emissions targets at
present technologies and abatement costs. At the global level, a minimum international
carbon price of EUR 60 per tonne of CO2 (2.4 times the 2018 average effective carbon rate)
would lower global CO2 emissions from fossil fuels by about 17%; more than half of this
reduction would result from starting to price emissions that are currently unpriced. This
points to the importance of non-price-based, complementary policies to enable acceleration of
development and use of clean technologies and facilitate substitution of low-carbon energy
sources for fossil fuels. Yet, to compare the relative efficacy and efficiency of the two
mechanisms, the OECD-IMF report (2022) underlines that the required stocktaking and
mapping into the respective emission bases of countries is needed to provide additional
orientation for policy makers. This will require supplementary work, as task that the two
agencies are presently undertaking.
The initial comparison of policies based on their emissions reductions and economy-wide
carbon price equivalent (ECPE) are only illustrative, as there’s no unique methodology to
date. There’s substantial variation across the G20 countries in the combined effect of chosen
policies and targets.
8
Relative to a no-carbon pricing scenario or other new mitigation
measures in 2030, CO2 reductions are around 10% or less in four countries, and range higher
than 50% in other four; further, countries differ vastly in instrument choices and the relative
contributions of sectoral targets; renewables’ targets contribute significantly to emissions
reductions in the policy mix in twelve countries; explicit carbon pricing contributes
substantively in eight countries; for most, a significant contribution to realise mitigation
commitments in NDCs could originate from policies not modelled therein, or not numerically
specified. Finally, ECPEs for combined policies exceed $100 per tonne of CO2 in seven
cases, are around $30 per tonne or less in another nine. The exercise lacks sensitivity analysis
at present, is dependent upon on model assumptions, the policy detail level, metrics used to
compare besides the choice of benchmark setup, how national and global variables evolve,
and the treatment of policies applied internationally and at sub-national levels.
There are several research attempts in related directions on climate policies. Nascimento et.al
(2022) have recently studied the G20 climate policies between 2000-2019 and find significant
policy adoption gaps. The study argues for widening the sectoral coverage of climate policies
as a portion of global emissions remain uncovered by policies. The study, however, did not
evaluate the performance of different policy instruments, leaving ambiguous the cost-
effectiveness and leakages due to low stringency, lax enforcement, and so on. On the other
hand, non-price policies aimed specifically at renewable energy, fuel efficiency,
electrification of passenger vehicles, and forestry have been found successful to implement in
China, EU, India, Japan and the United States as regards electricity generation, passenger
vehicles, freight transport, forestry, industry, buildings, agriculture, and oil and gas
production by Fekete et.al (2021) in their study of historical performance in terms of energy
system and greenhouse gas emissions indicators
7
The analysis uses the OECD Effective Carbon Rates (ECR) database and covers 44 OECD and G20 countries
over 2014-18 to estimate long-run responsiveness of CO2 emissions and government carbon-pricing related
revenues to carbon pricing within a unified empirical framework across countries, sectors, and fuels. The
baseline estimates imply that an increase in ECRs by EUR 10 per tonne of CO2 reduces CO2 emissions from
fossil fuel use by 3.7% on average. This responsiveness varies by sector and fossil fuel; it is stronger for road
transport, agriculture & fisheries, coal, diesel and kerosene. Source: Box 2 Estimating the CO2 emissions effects
of carbon pricing, OECD-IMF report (2022).
8
See OECD-IMF (2022), pgs. 14-16 for more details.
26
Two studies, Davis and Knittel (2019) and Levinson (2019 have examined the distributive
impact of the imposition of fuel economy standards (for the United States) to find no
evidence in support of fuel economy standards over carbon tax, while the latter concludes
energy efficiency standards were more regressive than energy taxes. Zhao and Mattauch
(2022) also in a recent study on US vehicle markets and China transport sector argue an
efficiency standard is found more equitable than carbon pricing when consumers prefer high-
carbon technology attributes and richer households have higher consumption of high-
emissions goods.
Sarker et.al (2020) analysed energy efficiency policy strategies of China, India, Indonesia,
and Japan based non-price instruments such as subsidies, tax reductions, voluntary
agreements, and market-based instruments such as white certificates and tendering. The study
observed mixed responses wherein voluntary agreements were significant in energy
efficiency in China but not others. Market-based instruments also play an important role in
reducing energy intensity. Direct subsidies showed burdening government budget with
limited results. Hahn and Stavins (1992) argued ease of implementation, equity, information
requirements, monitoring and enforcing capabilities, political feasibility and clarity to general
public are some of the important determinants other than efficiency and cost-effectiveness of
a climate policy.
Many studies have also examined the impact of climate policies upon public perception and
the associated challenges in public acceptance of carbon taxes. A recent survey of 40,000
respondents in G20 countries (Dechezleprêtre et.al, 2022) found that public perceptions on
their effectiveness in reducing emissions (effectiveness), and distribution impacts upon others
(disproportionate burden upon lower-income households), and own selves (self-interest)
determine acceptance of policies to significant extent. Following the Yellow Vests movement
in France, a survey by Douenne and Faber (2022) using a representative survey revealed
possibilities of rejection of a carbon tax and dividend policy in France as people tend to
overestimate their net monetary losses assuming the policy to be regressive, and do not
perceive it as environmentally effective.
The response of private capital is another yardstick to evaluate the impact of non-pricing
measures. For example, the impact of financial disclosures and ESG norms upon sustainable
investment flows can be considered significant. These have picked up significantly in
response, especially with the pandemic advent.
9
By early 2020, sustainable investments
aggregated USD 35.3 trillion in five major markets (Europe, US, Canada, Australia & New
Zealand, and Japan) according to the Global Sustainable Investment Review (2020). At
present, the cumulative green bond issuance amounts to USD 2.25 trillion globally, according
to Climate Bonds Initiative out of which USD 65.9 billion issued in 2023
10
. Another
estimates by Bloomberg in 2021 predicts USD 53 trillion by 2025
11
with Europe accounting
half of the total assets followed by the US, Japan, and other Asian economies. More recently
however, ESG investments have come under scrutiny with mounting concerns about
‘greenwashing’ of such investments (see Ch.3, Global Financial Stability Report, October
9
See https://www.ft.com/partnercontent/london-stock-exchange-group/the-rise-and-rise-of-sustainable-
investment.html.
10
Data accessed on March1, 2023. Available at: https://www.climatebonds.net/
11
https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/
27
2021). In this light, the G20 Climate Sustainability Working Group (2022) emphasised the
need for developing measures to reduce greenwashing through standards for measuring,
verifying and reporting (MRV) mechanisms; climate risk evaluation and management and
disclosure standards; and legal standards on environmental thresholds and performance
indicators.
There have been attempts to analyse experiences in introducing price and non-price-based
instruments. The OECD Environmental Policy Stringency index
12
compares environmental
policy stringency measure across countries. The index exhibits some interesting insights on
the developments in G20 countries (data available for only 15 of the G20 countries) (Panel4).
12
https://www.oecd.org/economy/greeneco/how-stringent-are-environmental-policies.htm . Stringency is
defined as the degree to which environmental policies put an explicit or implicit price on polluting or
environmentally harmful behaviour
Panel4. OECD environmental policy index in G20 countries
0
1
2
3
4
5
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Stringency Index
Chart 4.1. Environmental policy stringency in G20 AEs
Australia Canada France Germany Japan
Korea United Kingdom United States Italy
28
The policies have become more stringent in AEs over the years, especially in France, Japan,
Italy, and United Kingdom (Chart 4.1). However, the pace reduced considerably in recent
years as these plateaued. While most continued to increase policy stringency in the mid-
2000s, there is a considerable reduction in the extent of stringency in AEs post 2010. AEs
have been attempting to improve stringency measures since 2015.
On the other hand, EMDEs were late entrants to introduce stringent policy measures.
Countries like India, China, and Turkey have also progressed significantly in making their
policies more stringent over time (Chart 4.2). Nevertheless EMDEs (except Russia, and
South Africa) have not observed a significant decline in the pace of stringency. The EMDEs
have rather maintained a positive change trajectory, more so, post 2015. Hence, there is an
evidence that EMDEs have significantly increased the burden sharing of climate change
through its policy measures.
The OECD Climate actions and policies measurement framework database also provides a
comprehensive coverage of policy instruments
13
. G20 countries have mixed experiences in
terms of policy stringency across instrument types. Argentina and Saudi Arabia have the least
stringent policies on air emission standards. 11 countries have least stringent policies on ban
and phase out of coal power plants. Korea and Mexico are at the bottom for building energy
codes standards. France is the only country with highest policy stringency on carbon tax in
buildings whereas Canada, Japan, and South Africa have high stringent policies for carbon
tax in electricity sector. Except Brazil, Canada, Indonesia, and Mexico, all other countries
have the highest policy stringency on labels for vehicles. Russia is the only country with low
stringent policy on mandatory energy labels for appliances. Mexico is the only country with
13
https://oecd-main.shinyapps.io/climate-actions-and-policies/
Source: Author’s compilation
0
1
2
3
4
5
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Stringency Index
Chart 4.2. Environmental policy stringency in G20 EMDEs
Brazil China India Indonesia Russia South Africa Turkey
29
higher policy stringency on methane reduction. Argentina, China, India, Indonesia, and
Russia have low stringent policies for planning renewable capacity expansions.
IV. Conclusion
This paper considers the cross-country experience with non-price policy levers for lowering
carbon emissions. It takes stock of the variety of such measures employed by the G20
countries and their coverage across sectors. It digs deeper by differentiating the non-price
policies by the commonness of their use, purposes and broad targets sought to be achieved.
For a richer analysis, it examines the complementarity of their use along with price-based
measures, both explicit ones like carbon taxes and emissions trading schemes (ETS), or
otherwise such as feebates, subsidies in different sectors, and such like. In addition, the
sequencing patterns and the respective stringency levels across these countries are also
analysed.
The review of experiences offers several insights that merit deliberation and further
discussion by countries in the context of search for the best way forward to involve the
private sector in the low-carbon transition. One, most countries have instituted multiple non-
price policy levers that cut across sectors in a complex interplay, which can be difficult or
impossible to disentangle. This points towards challenges of causal interpretations,
evaluation, and comparative assessments. Two, the main policy motivations are often
diffused; this may be to reduce greenhouse gas emissions or another primary goal that is
extremely climate relevant. These correspond or align to an overall climate policy
framework. Three, there is frequent complementarity with price-based policy measures,
whose support to incentivize behavioural changes or encourage private investments is
noticeable.
Four, and notwithstanding some common patterns, the adoption of non-price measures is
quite unique amongst countries. These usually reflect or correspond to respective economic
structures, climate-specific vulnerabilities, mitigation requirements, the availability of
financial resources, amongst other factors. This points to both the need to appreciate and
adapt price-based policies in accordance, as also the limits to harmonization possibilities.
Five, although many non-price policy levers have for long been in place as well as increased
over time across countries, the evidence on their efficacy is inconclusive. The gaps in
evidence are large: These range from implementation and enforcement slippages,
effectiveness in reducing GHG emissions, their impact upon firms’ costs and competitiveness
losses and that upon households along with balance between the two, being the major ones.
Six, the challenges to evaluating the efficiency and impact are complex and several. Inter
alia, causal inferences due to multiplicity and the variations in responses across sectors,
quantification difficulties, etc impede empirical assessment. Seven, the comparative
effectiveness with price-based measures in reducing emissions is complicated likewise.
Specifically, the frequent overlap of price- and non-price-based mitigation instruments makes
it extremely difficult to disentangle the contribution of separate measures to emissions, risks
double-counting, amongst major issues. A recent analysis of the IMF-OECD (2022) on the
combined effect of the key measures (price and non-price ones) used by the majority of G20
countries in advancing their mitigation commitments reveals substantial variation across
countries. This underlines how differences in policy levers, their coverage, and other
variations can render estimating their sufficiency or otherwise in meeting net-zero emissions
30
targets extremely difficult. There is also the related concern about convincing private
participants in this regard.
To conclude, the need for better understanding about the efficiency of non-price policy
instruments, exclusive and in comparison, with price-based measures, must be emphasized.
Besides illuminating possibilities of a policy-mix and associated trade-offs, this is essential to
support international negotiation and coordination on climate policies, competitiveness, and
carbon leakages. The inability to decompose the relative emission impacts of price- and non-
price mitigation instruments has withheld progress in agreement on assessing the likely
reduction in emissions from policies or sets thereof until now.
31
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Annex
Data and methodology
The major climate policy databases available and widely used include:
i. Climate change laws database of the Grantham Research Institute at LSE and the
Sabin Center at Columbia Law School available at https://climate-
laws.org/legislation_and_policies?geography%5B%5D=36 ;
ii. OECD Policy Instrument Database for Environment available at
https://www.oecd.org/environment/indicators-modelling-outlooks/policy-instrument-
database/ ; and
iii. Climate Policy Database, maintained by New Climate Institute with support from
PBL Netherlands Environmental Assessment Agency and Wageningen University
and Research available at https://climatepolicydatabase.org/
We have relied on the Climate Policy Database for its wider and more comprehensive
coverage over other data sources including the databases mentioned above. The database
attempts to provide updated information especially for G20 countries. For our purpose, we
explicitly excluded price instruments-based policies in G20 countries. Many of the policies
have multi-sector and multi-instruments coverage across G20 countries. We thus assimilated
the information across five major mitigation areas of energy efficiency; energy service
demand reduction and resource efficiency; low carbon technology and fuel switch;
renewables; and non-energy use as grouped by the database.
We have also followed UNFCC (2014) broader classification of non-market approaches such
as- economic and fiscal instruments; regulations; voluntary agreements; framework targets;
information; education and awareness programs; and research and development. For detailed
policy instruments analysis, we further grouped the policies (similar to Linsenmeier et.al
(2022).
1
Table1. Selected targets of G20 countries across sectors to be achieved through non-
pricing tools
Country
Sector
Targets
Australia
Energy efficiency, Building
Building Energy Efficiency
Disclosure Act aims to deliver
more than $50 million in energy
savings, and approximately 3.5
million tonnes of emission
reductions over five year
Argentina
Non-fossil fuels, Energy
Regimen of Regulation and
Promotion of the Production and
Sustainable Use of Biofuels
requires all gasoline produced and
consumed in Argentina must be
composed of no less than 5%
biofuels
Energy, renewable infrastructure
The law on renewable energy sets
a minimum of 18% of total
electricity consumed from
renewable sources by 2023
AFOLU
Environmental Sustainability and
Insurance Program entails the
creation of an insurance
programme to sustain forestry
activities dedicated to
reforestation and enrichment of
primary forests
Brazil
Public awareness
Policy for Education on
Sustainable Consumption requires
public awareness and media
campaigns and train teachers on
including sustainable consumption
in their curriculum for primary
and secondary education
Energy efficiency
National Program for Energy
Conservation requires 20 per cent
of the funds by electricity
distributors to invest in energy
efficiency actions.
Canada
Emission reductions
Emission reduction plan 2030
provides $9.1 billion public
investment with sectoral targets
China
Renewable energy
Implementation Plan for Carbon
Peaking in Urban and Rural
Construction aims at new-build
public buildings and factories in
town and cities should be covered
at 50% by solar panels by 2025
Emission reductions, Industry
Plan on reaching peak CO2
emissions by 2030 in polluting
industries aims to slash energy use
by 13.5% from 2020 levels in
2025, and to reach peak carbon
emissions by 2030
EU
Transport
Directives for setting the legal
framework to transition from
yearly taxation to a pay-per-
kilometre system (road pricing)
2
and to favour low-emitting
vehicles
Energy efficiency
RePowerEU plan and Save
Energy Communication targets an
increase from 9% to 13% of the
binding Energy Efficiency Target
under the ‘Fit for 55' package
France
Energy, emission reductions
Energy transition law aims at
decreasing GHG emissions by
75% by 2050, cut the national
energy usage by at least 50% by
2050; reduce the share of fossil
fuels in energy production by 30%
compared to 2012; increase share
of renewables up to 32% of the
energy mix by 2030,
Sustainable mobility
Mobility orientation law imposes
ban on sales of fossil-fuelled cars
(petrol or diesel) by 2040;
Germany
Public sector, emission reductions
Directive on the Promotion of
Climate Protection Projects in the
Municipal Environment aimed at
achieving cumulative annual
greenhouse gas reductions of
around 1,200,000 tonnes of CO2
equivalent (net); limit the subsidy
input per avoided tonne of CO2
equivalent to an average of 70
euros per tonne (net)
Renewable Energy
Renewable Energy Sources Act
set a goal of generating 80% of
electricity supply from renewable
energy resources by 2030
Law on the reduction and
termination of coal-fired power
generation by 2038 and an
economic package to support coal
regions
India
Non-fossil fuels, Energy
Green Hydrogen / Green
Ammonia Policy provides waiver
of inter-state transmission charges
for a period of 25 years with
conditions
Sustainable mobility
Union budgets incentives through
tax rebates on loans, reduction in
GST rates for electric vehicles
Indonesia
Sustainable mobility
Decree targets 4-wheel Battery
Electric Vehicles in 2030 will be
750,000 units, while 2-wheel BEV
will be 2,450,000 units
Energy
Presidential Regulation mandates
the target of 23% New Renewable
Energy in national energy mix by
2025 and 1% reduction in energy
intensity per year
Italy
Multisectoral
National plan for resilience and
recovery aims at 32.1 billion-euro
investments for sustainable
mobility; 12.1 billion for energy
3
efficiency; and 11.2 billion for
renewable energy
Japan
Renewable energy
Act on purchase of renewable
energy provides for surcharge for
renewable energy to be paid by
consumers with exemptions; a
feed-in-premium scheme;
obligations to maintain funds for
decommissioning etc.
Mexico
Energy
National electric system
development plan aims at
electricity with 35% clean energy
by 2024; additional electric
capacity with a share of 83.4% of
clean energies between 2026-36;
Russia
Emission reductions
Federal law on GHG emissions for
mandatory carbon reporting for
most polluting companies and
carbon offsetting schemes
Saudi Arabia
50% energy from renewables by
2030
Turkey
Renewable energy
Utilisation of renewable energy
sources aims to increase the share
by 30% in 2023
UK
Non-fossil fuels
2GW of low carbon hydrogen
production capacity in operation
or construction by 2025
USA
Public sector
Zero GHG emissions of the
federal portfolio of 300,000
buildings, and 600,000 cars and
trucks, by 2050
Source: Author’s compilation, climate policy database