Ambitious Climate Policy Through Centralization?

Striking a balance between centralization and decentralization of competences is a challenge that dates to the start of European integration. There are some drivers that work towards greater centralization of EU climate policies – the need for enhanced climate action, electricity market integration and a realization of the Energy Union. At the same time, centralization in and of itself is not a guarantee for more ambitious or effective climate policies. In a new publication appearing in the journal Climate Policy authors Camilla Bausch and Benjamin Görlach of Ecologic Institute and Michael Mehling of the Massachusetts Institute of Technology (MIT) trace the evolution and role of the centralization/decentralization debate in the context of EU climate policy. The article looks at emissions trading and the promotion of renewable energy as cases of centralization vs. decentralization, but cautions that this trend is neither smooth nor guaranteed to persist. In the dynamic and reflexive governance system of the EU, there is no one-size-fits-all, optimal balance between centralized and decentralized policy from a climate perspective.

Centralization, as defined in the paper, is the aggregation of competencies concerning climate policy decisions and implementation at a higher level of governance—for example, at the EU as opposed to the national level. However, a tradeoff exists between enhanced coordination, consistency and clear leadership on the one hand and flexibility to account for diverse national circumstances on the other. Nevertheless, centralization does not necessarily lead to more ambitious policies, as exemplified by the struggling EU Emissions Trading System (ETS). Further, the authors argue that centralization can also slow down climate pioneers from ambitious unilateral action. As has occurred in the renewable energy field, a more decentralized approach can facilitate policy experimentation at the national level and cross-border policy learning. On the other hand, evidence from Germany showing that coordination and increased grid integration have been essential in accommodating rising shares of renewables suggests that in some cases centralization has been vital for boosting ambition.

In conclusion, it is difficult – if not impossible – to define an optimal level of centralization in climate policy. Climate and energy policies are a mixture of numerous interdependent and evolving parts – i.e., energy markets, pricing mechanisms (including emissions trading), technological and policy-driven developments (including renewable energy penetration or energy efficiency), but also involving concerns about competitiveness, security of supply and affordability. It is more helpful to carefully consider the implications of a centralized or decentralized approach for each case than paint with a broad brush.