Jakob, M.

Ecuador's climate targets: A credible entry point to a low-carbon economy?

in Energy for Sustainable Development, 27.05.2017

Peer Review , Task Force Public Economics for the Global Commons , Task Force Public Finance

Long-term credibility is a central pillar of climate policy. This paper assesses whether Ecuador's recently adopted climate targets, policies to decarbonize the power sector, and measures to reduce deforestation constitute a credible basis for a transformation towards a low-carbon economy. Based on the literature on the design of credible climate policy and expert interviews, we argue that even though Ecuador's existing policies may reduce emissions in the short term, they do not yet constitute an entry point for a long-term strategy of economic transformation. We then outline politically and institutionally feasible mitigation measures, which we evaluate from a dynamic policy sequencing perspective according to their potential to prepare the ground for more stringent measures to reduce emission in the future. These measures include inter alia reform of driving restrictions, public transport, vehicle efficiency standards, support for electric cars, and results-based payments to reduce land use emission. Such reforms will need to be phased in gradually and embedded in a broad fiscal reform package. To counter potential adverse distributional effects of higher energy prices, low-income groups could be protected by lowering other taxes, scaling up investment in education, and block-pricing schemes. Furthermore, increased participation of key stakeholders would likely reduce public opposition against energy- and climate-related policies, such as fossil fuel subsidy reform.