How To Correct Three Climate Policy Failures

We are living in an era of unprecedented political turmoil. With U.S. federal policies, programs, and agencies on the chopping block, policy conversations focus on immediate and visible subjects. Yet, institutional chaos provides an opportunity to reflect on deeper issues that caused the turmoil in the first place. How did we get into this mess and what is a realistic approach to fixing it?

Consider climate policies. In 2024, the Paris Agreement’s aspirational target of limiting the temperature increases to 1.5C was breached, and even the 2.0C goal seems to be slipping away. Instead of redoubling decarbonization efforts, the U.S. and the European Union are rolling back climate laws, Canada is axing the consumer carbon tax, China and India are continuing to build coal plants, and corporations are exiting net zero climate commitments.

Several explanations are offered for the sorry state of climate policy. First is the political power of energy-producing and energy-dependent sectors. Historically, the climate movement blamed fossil fuel companies for policy tardiness. It was a story of a decaying industry using politics to delay its demise. Now, climate policy is being tested by a rising industry, artificial intelligence (AI), a technology loved by liberal and conservative governors alike. As a result, U.S. electricity consumption, which was flat for the last 20 years, is on the rise: between 2024 and 2028, electricity demand is expected to grow by about 16%. Ironically, AI’s energy appetite is reviving the fortune of the coal industry as utilities extend the life of coal plants.

Second, the Ukraine war has propelled energy security and energy inflation to the top of the policy agenda. With rising energy prices, governments are not willing to bear the short-term domestic political costs of decarbonization to corner long-term global benefits. In the recent U.S. Presidential elections, Kamala Harris took credit for the largest increase in oil production in the U.S. history. Oil super-majors are refocusing on oil and gas exploration and production along with divesting from renewable energy, as exemplified by the U-turn by BP on this subject.

Third, climate action is increasingly embroiled in cultural wars. Conservatives label it “woke”. Climate concerns seem to be stronger among the educated elites, Piketty’s Brahmin left. Not surprisingly, in the “science versus populism” conflict, climate policy is a causality.

On the face of it, technological change, global political turmoil, and cultural wars are derailing climate policy. But we suggest that there is a deeper story here: the climate crisis reflects the confluence of market, government, and individual failures, which tend to reinforce each other.

The Three Failures Framework

Students taking an introductory public policy course will learn that when the market fails, the government intervenes to correct it. The assumption is that governments have the capacity and the willingness to do so.

But are governments always endowed with such qualities? Starting in the 1950s, many complained that governments were captured by business elites. Instead of correcting market failures, regulatory agencies institutionalized them. With the end of the Cold War and the delegitimization of statist models, government failure became the dominant policy concern – ironically to be corrected by introducing market-based policies.

What if both markets and governments fail at the same time – perhaps due to the same underlying cause? This is the story of climate policy.

Might these dual failures create space for individual-level action? This would involve individuals confronting the root cause of climate policy failure — overconsumption and the addiction to carbon-intensive lifestyles.

The effectiveness of individual action faces several hurdles. Some believe that individuals are unlikely to bring about systemic changes required for decarbonization. Moreover, an emphasis on individual action could allow big corporations to absolve themselves of the responsibility for greenhouse gas emissions; scholars call it soft climate denial.

The core debates on individual action have political, philosophical, sociological, and psychological dimensions. Could individuals bring about systemic changes? Would individuals be willing to try to do so, while recognizing that such actions will impose costs on them?

We suggest that individual action can lead to climate progress. Moreover, it is a practical response to the current crisis, although not a perfect one. The challenge is to persuade individuals to start believing in their agency and motivate them to incur the costs of exercising it.

The Role of Individual Action

Climate change is a reflection of our addiction to fossil fuel-dependent lifestyles. Our climate impact goes beyond flying in planes, driving cars, and eating meat. For example, many like updating their wardrobes every season, not recognizing that fast fashion contributes to about 10 percent of global greenhouse gas emissions.

The implication is that individuals need to examine their consumption choices while recognizing that some choices are more malleable (Dietz et al. call it the behavioral wedge) while others are not.

In addition to reducing their carbon footprint, individuals can influence climate politics (and correct market and government failures) through peaceful and legal boycotts and buycotts. This is voting with dollars.

Take the case of Tesla. Unhappiness with Elon Musk’s politics has led individuals to participate in the “boycott Tesla” movement. Compared to last February, Tesla’s monthly sales are down by 76% in Germany, 26% in France, 48% in Denmark, and 42% in Sweden. Since President Trump’s inauguration, Tesla’s share price has declined by about 33% and its market capitalization by $386 billion.

The bottom line is that government and market climate failures are unlikely to self-correct in the short term. At a deeper level, both reflect our addiction to a carbon intensive lifestyle. This also means that as consumers, individuals could have an impact on climate progress, but this requires rethinking our mundane, daily choices as well as the more dramatic ones such as buying a car.

Consumption switches and behavioral changes will impose costs and disrupt our lifestyles. And we may not be able to detect an immediate impact on say national-level climate policy. But the hope is that carbon-frugal lifestyles will become a community norm, as opposed to a performative statement.

Eventually, new consumption choices could have a substantive impact on both governments and firms. The reason is that companies spend billions of dollars to understand our preferences based on our Google searches and social media activities. We should deploy this leverage with companies – tell them exactly what we think and what we want. We have leverage over elected officials as well, a critical issue because the planning for the 2026 U.S. Congressional elections is already underway. We can participate in townhalls, join peaceful protests, and make our voices heard.

As climate concerned individuals, we have a choice to make. Are we ready to take on the challenge of confronting our own overconsumption? Or, would we continue to blame firms and governments for the climate crisis, justify our inaction, and reinforce market and government failures?