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As efforts dedicated toward climate action continue to gear up, there remains a rising debt to GDP ratio tension in both emerging and developing countries. As public investment expenditures and renewable energy subsidies start to form a bottleneck situation, concerned governments begin to revise their fiscal policies and future investment options. The issue now is not solely about energy anymore; it is a policy trilemma among achieving climate goals, fiscal sustainability, and political feasibility. An added difficulty within this equation is that focusing specifically on any two could potentially destabilize the third. This is why the most crucial aspect of tackling this trilemma is balance and coordination.
SMART POLICIES: THE SOLUTION?
While no single measure can achieve all climate goals, and there is no such thing as a one-fits-all solution in this scenario, smart policies are flexible enough to address various challenges while simultaneously considering unique situations. An example of this is carbon pricing. Currently, the tax in Singapore is set at around USD 4 per ton of CO2 equivalent. By the end of 2024, the rate will have quintupled to USD 19 and in 2026 to USD 45. Carbon pricing can address the issue of climate goals (by incentivizing reduction in carbon), fiscal sustainability, and political feasibility, making Singapore the first country in Southeast Asia to implement such a measure. The lessons from its experiences stand to benefit the nearly 50 advanced and emerging market economies, as well as around 20 countries contemplating the introduction of carbon pricing. While this is good news, carbon pricing is not the only method of smart policies that should be implemented
A SHARED RESPONSIBILITY
This trilemma represents a shared responsibility in which all stakeholders must be active. These are not issues that can be solved overnight or with the efforts of a sector or a singular country. To adequately and sustainably address the concerns, coordinated efforts from both the private and public sectors are needed in conjunction with those of governments across the globe. Emerging markets and developing countries continue to face challenges that require concessional financings to support their efforts toward a green transition and spread information regarding establishing and innovating low-carbon technologies. As it stands, the responsibility of financing the climate needs falls to the private sector. Nonetheless, simultaneously, governments and businesses must coordinate their efforts.
While this trilemma seems like a looming challenge, one that requires strong collaboration and commitment, it is possible to overcome it. Aside from collaborations and contributions from the public and private sectors, communities can also take action. By leveraging their powers as dormant stakeholders, whether through activism or social media, they, too, can generate change and awareness in the community. Other hands-on approaches could also come in the form of consciously reducing energy consumption, transitioning to cleaner forms of energy, conserving water, recycling, or any form of sustainability endorsement.
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