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The chapter compares how the G20, the OECD and the IMF addressed fossil fuel subsidies and finds that while the three institutions agreed on the importance of reform of fossil fuel subsidies due to their environmental and economic consequences, they also differed in how they addressed these subsidies. Most notably, the IMF adopted a radical definition of fossil fuel subsidies based on the notion of corrective taxes, which stood out against the more established definition of the OECD. The chapter demonstrates that economisation may lead to diverging framings of the issue in economic terms. Subsequently, the chapter outlines how this divergence was driven by the differences in worldview, policy entrepreneurship and the degree of autonomy of the IO bureaucracy from principals. Yet, the similarities between their worldviews (they agreed on a range of fundamental issues), institutional interaction and overlapping memberships pulled in the direction of convergence between the institutions. Finally, there is a discussion on the consequences of this divergence at the international and domestic levels, while the convergence between the institutions was important for the attention to the issue and the norm of fossil fuel subsidy reform.
The IMF addressed fossil fuel subsidies along two strands, both recently increasing in importance. The first strand focused on the lack of a carbon price and on solving this problem from the perspective of neoclassical economics, the second on countries which had had fiscal problems exacerbated by fossil fuel subsidies, and which were induced to reform these subsidies. The IMF’s institutional worldview based on neoclassical economics was the key factor shaping its approach. The second strand had considerable influence on fossil fuel subsidy reform in countries under IMF programs such as Indonesia, whereas the first strand had an impact on the public debate in countries including the UK and Denmark.
This chapter describes the history and track record regarding environmental issues and institutional worldview of respectively the IMF, the G20 and the OECD. Following the 2008–2009 financial crisis the G20 became the global forum for the coordination of economic policy, and the emphasis on economic objectives is visible in its prioritisation of issues and their economic impact. One of the most powerful international institutions, the IMF has a strong track record when it comes to influencing state policy, but has traditionally not paid much attention to environmental protection. Finally, the OECD promotes policies improving the economic and social well-being of people, and since the 1970s it has influenced environmental policy on the global level and within the OECD countries.
The chapter describes what climate finance is, how it over the past ten years has increased in importance both within climate negotiations and in the implementation of climate policies, and the key issues of contestation in this regard. The chapter includes an outline of the cognitive debate regarding what kinds of financial flows can be defined as climate finance, followed by a discussion of the key normative issues of contestation in climate finance discussions. The following section focuses on equity versus efficiency regarding the generation and allocation of climate finance. Finally, the most important groups of actors (beyond the G20, the OECD and the IMF) and their roles in climate finance are discussed.
This chapter summarises the main findings of the book: international economic institutions address climate issues through economisation, yet there are differences in how exactly this economisation defines the issue at hand, differences mainly shaped by the institutional worldview of the institution and to lesser degrees by the relationship with member states. The differences were mitigated by the interaction between the institutions. The institutions were more influential regarding fossil fuel subsidies than regarding climate finance. This is due to fossil fuel subsidy reform resonating more with domestic actors than climate finance due to its positive fiscal impact (unlike climate finance that constitutes expenditure) and closer fit with neoclassical economics. These findings are discussed in the wider perspective of economic institutions and climate politics, arguing that economisation does not lead to a paradigm shift away from established practices of environmental politics. Furthermore, the economisation of climate finance and fossil fuel subsidy reform does not necessarily entail an overarching paradigm shift within the institutions, which continue with unsustainable practices such as political and economic support to fossil fuel production and consumption.
The introduction outlines how international economic institutions increasingly are involved in climate politics, why this involvement matters and why it makes sense to describe it in terms of economisation. Specifically, the chapter outlines the concept of economisation and how it consists of framing an issue as an economic issue as well as enabling economic institutions to address the issue. The book uses economisation to understand the G20, OECD and IMF’s respective output regarding fossil fuel subsidies and climate finance respectively, as well as the factors that shape this output and the consequences of the output at the international and domestic levels. Subsequently, the chapter outlines the relevant literature on climate governance and international institutions/organisations, and identifies the contribution of the book to these bodies of literature. Next, the chapter explains why it makes sense to select the cases of climate finance and fossil fuel subsidies, which are both characterised by economic institution involvement, while the relationship between their impact on state budgets and on the environment pulls in opposite directions. The section proceeds with why the selection of the G20, OECD and IMF is academically relevant. The following section outlines the use of data sources and methods in the analysis.
This chapter develops the theoretical framework for studying how the economic institutions have addressed climate finance and fossil fuel subsidies, which is applicable to other cases of international institutions addressing policy issues, particularly issues beyond their usual responsibility. Drawing on literature on institutional output, it provides a framework for analysing such output (in terms of cognitive and normative ideas as well as incentives ), the factors shaping the output (institutional worldview, policy entrepreneurs, relations with member states and interaction with other institutions) and the consequences of the output on the international and domestic level (normative change, cognitive, agenda-setting and changes to incentive structures).
Introduces fossil fuel subsidies and the various attempts to address them on the domestic and particularly the international level, attempts that have taken off during the last ten years. The chapter outlines the different definitions of fossil fuel subsidies, definitions that have far-reaching political consequences, followed by an overview of the estimates of the size and scope of existing fossil fuel subsidies. Subsequently, the chapter discusses the domestic politics of fossil fuel subsidies and their reform, followed by an overview of the efforts to address fossil fuel subsidies of other institutions than the ones studied in this book, including the World Bank, the IEA, and non-state actors.
The G20 has addressed climate finance from the attempt to reach an agreement in 2009 to the more technical working groups that have addressed climate change from an economic perspective. This perspective entails stressing cost effectiveness, the economic consequences of climate change and addressing climate change with economic instruments. Its consequences were most pronounced on the international level and particularly the UNFCCC and the industrialised countries’ commitment to mobilise 100 billion dollars in climate finance, as well as on institutions tasked with providing analysis to the G20 the World Bank, the OECD, the IMF. The consequences on the domestic level are less discernible. The G20 output on climate finance has been shaped by entrepreneurship from Presidencies, membership circles, interaction with the UNFCCC.
The OECD has a long institutional history of defining and providing knowledge about fossil fuel subsidies. While the G20 commitment to reform fossil fuel subsidies lifted OECD efforts to address fossil fuel subsidies to a new level, the institutional worldview of the OECD bureaucracy (influenced by the experience of addressing other kinds of subsidies) shaped how it was addressed. The OECD has been important in providing ideas, knowledge and possibilities for learning about fossil fuel subsidies among states, and influenced how the G20 and other international institutions addressed fossil fuel subsidies.
The OECD has worked with climate finance since the 1990s, addressing it from both a development and an investment perspective. As a knowledge-producing institution, the OECD has produced numerous reports and other publications on climate finance, which can be divided into two strands: A development strand within which the DAC has published statistics on the provision of development aid with climate objectives, and an investment strand producing analyses of how to redirect investment to green purposes. The former perspective led the OECD to frame climate finance as a subtype of development finance while stressing its economic aspects (cost-effectiveness, leveraging private finance). The latter, less important, perspective framed climate finance as an instrument for redirecting investments from 'brown' to 'green' and linked it to fossil fuel subsidy reform, carbon pricing and institutional investment policy. The OECD’s approach had an ideational influence on how both the G20 and the OECD member states addressed climate finance. The OECD’s output on climate finance was shaped by institutional interaction, the OECD worldview and the member states. The chapter finds that the consequences of OECD output at the international was most salient regarding the UNFCCC, and at the domestic levels most salient regarding the development strand.