At any moment in time, you can ride a bike with least effort by cycling in first gear. But if you want to ride around the block with least effort, first gear will not be ideal. By failing to distinguish between these two different situations, economists have recommended the worst possible climate change policy to governments. Contrary to their belief, emissions trading will achieve decarbonisation at maximum cost, and minimum speed.

The greatest progress so far in decarbonising the global economy has been made by governments that ignored the advice of economists. Investing in new technologies turns out to be a more effective way of changing things than taxing the incumbents. We need to stop being surprised by this and start replicating those successes.

This chapter looks at the process of restructuring of energy governance in CEE countries, focusing on common patterns and differences in terms of market opening, competition and patterns of ownership. Here it maps efforts towards the liberalisation of the energy sector and explains the enduring variation in political and economic institutions across countries. The challenge of liberalising energy markets while ensuring energy security is discussed in more detail, looking in particular at the implications for the complicated relationship with Russia. Finally, the chapter asks to what extent this restructuring, however incomplete, has permitted an opening of the structure of energy governance to new actors.

This chapter discusses the role that fiscal policy can play in the transition to a carbon-neutral economy. In other words, it discusses how to design fiscal policy, both on the revenue and on the expenditure side, to reach net zero emissions by mid-century in a credible, growth- and distribution-friendly way. Furthermore, the chapter discusses how decarbonisation is likely to impact public finances, shedding light on what change might be required in tax revenues/expenditures, and if debt sustainability risks might arise from the green transition.

Drawing on abundant fossil fuels endowments, Canada has built one of the most carbon-intensive economies in the world. Within the Canadian federation, provincial governments control the vast majority of natural resources, including both hydro-electric potential and fossil fuels. However, the uneven distribution of those resources has yielded tremendous variation in the carbon intensity of provincial economies, and equally great variation in provincial governments’ climate ambitions. In this chapter, I identify three phases in Canadian climate federalism. From 1990 to 2006 a ‘joint decision trap’ prevailed in which the most fossil fuel-dependent provinces vetoed national solutions. From 2007 to 2015 a truncated innovation and diffusion dynamic emerged in which provincial leaders adopted ambitious and sometimes innovative climate policies. However, fossil fuel-dependent provinces did not follow their lead. Emissions reductions hard won by provincial leaders were undone by emissions growth by their recalcitrant neighbours. The third phase, since 2016, is characterised by federal unilateralism. While the mere threat of federal action initially yielded provincial collaboration in an ambitious pan-Canadian climate plan, successful implementation ultimately turned on the federal government’s willingness to follow on that threat. I conclude that, on balance, federalism has exacerbated the challenge of climate action in Canada.

At any moment in time, you can ride a bike with least effort by cycling in first gear. But if you want to ride around the block with least effort, first gear will not be ideal. By failing to distinguish between these two different situations, economists have recommended the worst possible climate change policy to governments. Contrary to their belief, emissions trading will achieve decarbonisation at maximum cost, and minimum speed.

The greatest progress so far in decarbonising the global economy has been made by governments that ignored the advice of economists. Investing in new technologies turns out to be a more effective way of changing things than taxing the incumbents. We need to stop being surprised by this and start replicating those successes.

This chapter focuses on the success of the Liberal Party under its new leader Justin Trudeau in rising from its third party status in 2011 to win a majority of seats in the 2015 election. Promising to abandon austerity budgeting and boasting that “Canada is back” on the world stage, Trudeau embarked on progressive policies relating to Indigenous relations, international affairs, gender equality, climate change, admission of Syrian refugees, child care, and infrastructure spending. His progressive thrust was soon compromised by countervailing forces emanating from provinces, corporations, social conservatives, and American president Donald Trump who demanded a renegotiation of the NAFTA agreement, embroiled Canada in a trade war with China; and treated Trudeau and Canada with open contempt. Unable to square national environmental policies with demands from Alberta and Saskatchewan for more pipelines to carry their oil and natural gas to distant markets, Trudeau was brought low by his government’s decision to buy the Kinder Morgan pipeline to expand Alberta’s exports of heavy oil and by energetic efforts to protect SNC-Lavalin, a multinational corporation based in Montreal, from being persecuted for its corrupt practices in Libya and elsewhere. With Trudeau’s claims to transparency and commitment to environmental sustainability called into question, Trudeau lost the support of many progressive voters, who turned to the Green Party and the NDP in the October 2019 federal election.

Trade rules must further the objectives of global sustainable development, starting with addressing the nexus between trade and climate change. Therefore, trade rules must support carbon pricing, including by allowing border tax adjustments and other border carbon adjustments. The WTO must approve a WTO climate waiver to support national climate response measures in furtherance of the goals of the Paris climate agreement.

This final chapter does not cover any new principles; instead it presents case studies that have a huge global impact in terms of both managerial and government decision making. These case studies relate to: the role of big tech firms in the economy and the opportunities and threats that they present; the problems that the Covid-19 pandemic has posed for governments at the global level; and the problems that climate change is posing for both governments and firms, again at the global level. The last two cases involve geopolitical issues that go beyond the scope of the text, but it is important for managers to have a general appreciation of these issues in order to anticipate government policy and respond appropriately. The questions at the end of the case studies are intended to prompt students to utilize principles explained throughout the text to develop an understanding of the relevant issues and determine optimal courses of action.

To confront the climate crisis, we need to hedge our bets against the risk of climate change. We must be willing to spend some money now in order reap a larger benefit that will take many decades to deliver. This is similar to the philosophical concept of Pascal’s Wager, where one bets a finite resource for a potentially infinite reward. But estimating how much we should spend now is not easy; attempts to estimate this amount – the “social cost of carbon” – produce a wide range of numbers. We may need to accept that there is going to be radical uncertainty in any numerical estimate. Nevertheless, we can use climate models to quantify the risk of climate change as best we can, while taking into account the different types of uncertainties. Often, risk assessment requires numerical probabilities, but these are not always available for uncertainties associated with climate prediction.

Climate change is a well-recognized common concern of humankind. On that basis, this chapter explores the implications of the Common Concern doctrine upon climate motivated rulemaking and implementation in the trade regime. The particular aspect of the climate change problem dealt with here is that of low-carbon technology diffusion. It is proposed that based on this doctrine, the prevalent narrative of trade and technology diffusion issues be reframed in a way that prioritizes the need for resolving existing market failures preventing new technologies from being adopted, especially those of high price, absence of incentives and lack of financing options. Going further, the chapter then closely analyses two potential trade measures – (i) carbon pricing with cross-border recycling of revenue for technology support, and (ii) better rates of official export credit support for low-carbon technologies. It is found that the doctrine of Common Concern, apart from being an excellent normative framing device, can aid better understanding of the WTO rules, and also inspire reforms thereof to facilitate diffusion of clean technologies.