05/07/2021

Ostrom’s Polycentrism: A Guiding Principle for Decentralised Responses to Anthropogenic Climate Change

Per Institut Ostrom

By Vedant Sinha

Decentralised decision-making is a solution to the environmental challenge of anthropogenic climate change because it is a problem that originates at multiple scales and differing contexts (Ostrom, 2009). Decentralised decision-making processes enable the emergence of flexible responses that better fit the externality driving climate change at various levels.
First, we will interpret the term decentralisation. Then, we will explain how the complex and multi-level causes and consequences of climate change call for heterogenous policy responses under decentralised decision-making. Here, we will elaborate on Ostrom’s (2009) idea of polycentrism, synonymous with decentralised solutions. Finally, we will respond to the objection of greenhouse gas (GHG) emissions leakage posed against the decentralised approach.

Decentralisation refers to a process where decision-makers at various levels have autonomy in choosing policy instruments involving differing degrees of engagement by the state, private sector and local community groups. The environmental problem of “climate change is an externality that is global in both its causes and consequences” (Stern, 2007, p.25). Conventional academic discussions have characterised the decentralisation vs centralisation debate as to the market and state involvement in policies (Stevenson, 2018) responding to the externality of greenhouse gas emissions driving global warming and climate change. However, we will be interpreting and defending Ostrom’s (2009) decentralisation approach because it is more nuanced, and it offers an alternative to the market-state spectrum of solutions. It opposes the notion that a ‘one size fits all response to environmental challenges can be found only in command-and-control legislation or market- based instruments (Ostrom, 2009).

The centralised view of the climate change problem draws on the established consensus that the causes and consequences of climate change are on a global scale (Stern, 2007; IPCC, 2014). To a great extent, this claim is valid because empirical data shows that the rise in average sea levels and temperatures are global effects found to be causally related to the global increase in GHG emissions (IPCC, 2014). Though the confidence interval for the isolated causal effect of GHG emissions can be estimated with less certainty, it nonetheless indicates a practically and statistically significant effect of increasing GHG emissions in driving observed global warming (IPCC, 2014). Because it sees the problem as global, a centralised view focuses on solutions based on international collective action (Stern, 2007). The emissions trading scheme set up under the Kyoto Protocol is an example of international collective action to tackle climate change. It was a centralised solution because it implemented a uniform solution for reducing GHG emissions on an international level (Harrison et al., 2011).

Despite the evident global causes, actions of individuals, families and firms at the national, regional and local levels contribute to the global stock and flow of GHG emissions (Ostrom, 2009). While some consequences of climate change are seen as a general global trend, there are differential impacts on “regions depending on their geographic location, ecological and economic conditions, prior preparation for extreme events, and past investments” (Ostrom, 2009, p.4). Ostrom’s claim makes sense because emissions at the GHG global level come from sources and GHG emitters operating at sub-national and local levels. Conceptually, Ostrom’s (2009) idea opposes a centralised view of climate change that predominantly emphasises its global aspects and prioritises international collective action. Instead, Ostrom (2009) proposed a polycentric view where diverse policy solutions are experimented with and implemented on multiple levels and contexts.

Under Ostrom’s decentralised decision-making approach, a rigid C&C or market-based policy instrument does not need to be picked and applied at an international level to tackle the problem of climate change. Instead, she supports applying a range of policy responses on a national, regional or local level with different degrees of involvement by the state, market actors and local groups (Ostrom, 2009). Ostrom’s decentralised solution to mitigating climate change is more convincing than a centralised view because it acknowledges the underlying scales and differing contexts from where the global GHG emissions externality problem originates. Polycentric solutions allow actors to choose policy instruments that best fit the context of the GHG emissions problem. For example, in Berkley, California, firms, community organisations and local governments successfully cooperated to encourage the adoption of Solar-PV technology in residences (Ostrom, 2009). Ostrom provides several such examples where instead of uniform policy intervention at all levels, flexible solutions involving the government, market and community organisations at the state and local level successfully reduced GHG emissions. Therefore, a decentralised approach to mitigating climate change seems to be a viable alternative to a centralised one.

Critics of decentralised solutions argue that the absence of universal and uniform coverage of an environmental policy instrument at all levels results in leakage of GHG emissions (Wiener, 2007). Leakage occurs when polluting firms in a state with strict policies against GHG emissions (high carbon price or strict emission standards) relocate to a state with relatively lax policies against GHG emissions (Harrison et al., 2011). Opponents of the polycentric approach claim that due to the decentralised and non-uniform nature of emission policies at different levels and contexts, GHG emissions are not reduced but transferred. The flow of global GHG emissions in the atmosphere remains unchanged even though their sources have relocated. Therefore, critics believe that decentralised solutions will fail to solve mitigate the problem of climate change.

However, the leakage problem of polycentrism is based on two misguided assumptions. First, it assumes that leakage of emissions is either 100% or very high (Wiener, 2007) because only then can a decentralised approach of heterogenous policy interventions be considered a complete failure. Leakage levels well below 100% would weaken their objections about the effectiveness of polycentrism because it would mean that GHG emissions were indeed reduced even if a portion of them were relocated. Harrison et al. (2011) report that the GHG emission leakage rate for the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade scheme in the U.S. was just 40%. The leakage rate of the RGGI scheme implies that “for every 10 tons of CO2 emissions reduced in the state”, 4 tons were relocated to other states, but 6 tons was reduced (Harrison et al., 2011, p.8). Though Wiener (2007) claims that it is possible for 100% leakage, he provides no empirical precedent of heterogenous GHG emissions policy resulting in 100% leakage. Moreover, the fact that an industry incurs costs and constraints in relocating capital and labour to a state with lax policies against GHG emissions also undermines Wiener’s (2007) theoretical proposition of 100% leakage.

The second unfounded assumption underlying the leakage objection is that a state with a lax GHG emissions policy will stick with it indefinitely or for a long time. However, polycentrism encourages experimentation with and learning different policy responses across subnational levels (Ostrom, 2009). As strict GHG emissions policies broaden coverage (Harrison et al., 2011), leakages reduce further because relocating to a different sub-national level would not mean greater freedom to pollute without costs and constraints. The broadening of strict GHG emissions policies does not imply a switch to a centralised approach because policymakers and private actors have autonomy over the balance of state,
market and community organisation involvement they want in their policy solution. There is no homogenous policy being imposed at all levels by a central authority.

In sum, we have explained that climate change is driven by decentralised externality problems emerging at multiple scales and varying contexts. A decision-making process of choosing polycentric solutions involving the state, private actors, and local community groups applied at multiple levels and contexts is better suited to the decentralised nature of the climate change problem. We have also defended the decentralised approach against the objection of GHG emissions leakage. Therefore, decentralised decision-making is a solution to the environmental challenge of anthropogenic climate change.

 

References

 

Harrison, D., & Foss, A., Klevnas P, & Radov, D., 2011. Economic Policy Instruments for Reducing Greenhouse Gas Emissions. Oxford University Press. In: Dryzek, J.S., Norgaard, R.B. and Schlosberg, D. ed. 2011. The Oxford handbook of climate change and society. Oxford University Press.

IPCC., 2014. Climate Change 2014 Synthesis Report: Summary for Policymakers

Ostrom, E., 2009. A polycentric approach for coping with climate change. The World Bank.

Stern, N. and Stern, N.H., 2007. The economics of climate change: the Stern review. Cambridge University press.

Stevenson, H., 2018. Global environmental politics: Problems, policy and practice. Cambridge University Press.

Wiener, J.B., 2007. Think globally, act globally: The limits of local climate policies. University of Pennsylvania Law Review, 155 (6), pp.1961-1979.