12.2.3.1 State

The transition from government to governance recognizes the changing trends among political constitutions in developed and developing countries. While varying in speed and scope in individual states, these institutional reforms broadly span the domains of government and market activity, the powers of public executive administration relative to that of legislatures and courts, the degree of federalism within nation states, the organization of the financial system and capital markets, the demands of corporate governance and corporate social responsibility, the structure of industrial organization and public utilities, the strength and engagement of civil society organizations, and the delegation of national sovereignty to multinational and regional law and regimes (Berger and Dore, 1996; Hollingworth and Boyer, 1997; Schmidt, 2002; Heller and Shukla, 2003).

The specific constellation of these reforms depends on the pre-existing institutions in a country, the local politics of reform and resistant domestic interests. Yet in almost all cases, the re-organization of governance institutions will have important implications for the choice of potential national development paths in key input sectors. For example, a recent study of electricity sector reforms in five leading emerging nations - China, India, South Africa, Brazil and Mexico - found that in no cases did the changes away from power provision through state monopolies correspond closely to the orthodox designs of electricity market reforms (Box 12.2).

All five electricity sectors separate ownership of generation from transmission and distribution and allow participation in the generation markets by independent, often foreign, power producers. Nowhere have competitive generation markets flourished or has the state withdrawn substantially from system planning, tariff setting based on social and political criteria, infrastructure financing, or predominant ownership of major power sector firms (Victor and Heller, 2007). Yet, the consequences for climate friendly energy development have varied across these emerging markets because of nationally specific characteristics. Social goals, including increasing access and renewable power development, have not been interrupted. In some cases, such as the Indian State of Gujarat, the substitution of public grid power by privately developed stand-alone power plants has increased the rate of substitution of coal-fired generation by natural gas (Shukla et al., 2005). In Mexico, complex, financially problematic, government guarantees of tariffs have also encouraged gas fuel diversification from oil to gas. In other cases, including China, the ongoing flux in institutional reforms creates both risks of intensive coal-based power development and the opportunities of more climate friendly energy growth.

The choice of policies that governments seek and are able to pursue is influenced by the political culture and regulatory policy style of a country or region, and the extent of public expectations that their governments will take a strong or weak lead in pursuing policy responses. Earlier efforts to address the issues of institutional capacity for mitigation include a compendium of policy instruments (DOE, 1989); two collections of country studies (Grubb, 1991; Rayner, 1993) and a review of the relevant social science literature on institutions (O’Riordan et al., 1998).

A substantial body of political theory identifies and explains national policy styles or political cultures. The underlying assumption is that individual countries tend to process problems in a specific manner, regardless of the distinctiveness or specific features of any specific problem; a national ‘way of doing things.’ The key features of prevailing ‘policy styles’ in various countries and regions of the world are highlighted.

Richardson et al. (1982) identified national policy style as deriving from the interaction of two components “(a) the government’s approach to problem solving and (b) the relationship between government and other actors in the policy process.” Using a basic typology of styles, countries are subdivided according to whether national decision-making is anticipatory or reactive, and whether the political context is consensus-based or impositional. Many studies of national differences in institutional arrangements for making and implementing environment and technology policy emphasize the essentially cooperative approach to environmental protection in Europe and the more confrontational approach that predominates in the United States (Lindquist, 1980; Kelman, 1981; Kunreuther et al., 1982). Jasanoff (1986) shows how information about established technologies, such as formaldehyde use, is interpreted differently by scientific advisory bodies in different countries. In particular, Brickman et al. (1985) argue that decentralization of decision-making in the USA both increases the demand for scientific details of technological and environmental hazards and engenders competition between different explanations. Europeans generally expect national government, and increasingly the European Union, to take the lead in all matters pertaining to environmental safety and health, as well as economic and social welfare.

Recent empirical studies confirm the view that only detailed and case-specific analyses of government institutions and policies can illuminate national differences in the pursuit of environmental and other regulatory objectives. Weiner (2002) finds that, contrary to common assertions, the USA and Europe have not differed substantially in their use or implementation of the precautionary principle. Stewart (2001) finds that the USA has successively moved between alternative forms of environmental policies, beginning with command and control, before switching toward market instruments (permits and taxes), and later experimentation with flexible negotiated regulation and information based instruments.

In these cases, national political and regulatory cultures are distinguished by institutional factors, such as the judicial doctrines of administrative review and regulatory standards of general treatment, more than cultural predilections that support or restrict government action. Finally, governments appear to have varied traditions of policy preferences and authority. European governments and populations appear more comfortable with lifestyle (demand) regulation than do North American governments, which often tend to look to longer-run technology development support in collaboration with market actors (Nelson, 1993).

An important, though often neglected, issue in the choice of policy instruments is the institutional capacity of governments to implement the instrument on the ground (Rayner, 1993). This is often a matter of what countries with highly constrained resources think that they can afford. However, even industrialized nations exhibit significant variation with respect to the characteristics that would be considered ideal for the successful application of the complete suite of policy instruments listed above. These attributes include (O’Riordan et al., 1998):

• a well developed institutional infrastructure to implement regulation;
• an economy that is likely to respond well to fiscal policy instruments because it possesses certain characteristics of the economic models of the free market;
• a highly developed information industry and mass communications infrastructure for educating, advertising, and public opinion formulation;
• a vast combined public and private annual RD&D budget for reducing uncertainties and establishing pilot programmes.

To the extent that these close to ideal conditions for conventional policy instruments are missing, policy-makers are likely to encounter obstacles to their effectiveness. For example, both Brazil and Indonesia (Petrich, 1993) have carefully crafted forest protection laws that could be used to secure forest preservation and carbon management. However, neither country is able to allocate sufficient resources to monitoring and compliance with those laws to ensure that they are effective. Even in industrialized countries, competition for resources among state agencies responsible for promoting economic development and those responsible for environmental protection are almost universally resolved in favour of the former. In much of the developing world, the shortage of programmes resources is exacerbated by pressures to utilize natural resources to earn foreign income. This increases demands of population for energy, and pressures to convert forest land to human habitation. As a result, legislative initiatives often seem to “leave more marks on paper than on the landscape” (Rayner and Richards, 1994).

Less industrialized countries often have poor infrastructures, exacerbated by lack of human, financial, and technological resources. In addition, these countries are likely to focus on more basic considerations of nation building and economic development. The economic conditions of less-industrialized countries also present opportunities to achieve both sustainable development goals and emissions reductions measures at lower cost than in the industrialized countries.

The notions of adaptive and mitigative capacity advanced in the IPCC TAR appear to reinforce the idea that the capacity to develop and implement climate response strategies are essentially the same as those required to develop and implement policies across a wide variety of domains. They are largely synonymous with those of sustainable development. The issues and cases discussed here suggest that the challenges of capacity building for sustainable development is not confined to the less industrialized countries, but that industrialized countries also fall short of the capacity to respond to climate mitigation challenges in a sustainable fashion.

As O’Riordan et al. (1998) note “the more that climate change issues are routinized as part of the planning perspective at the appropriate level of implementation, the national and local government, the firm, the community, the more likely they are to achieve desired goals. Climate policies per se are hard to implement meaningfully. However, merely piggybacking climate change onto an existing political agenda is unlikely to succeed.”