Imprisoned in the dilemma?

Parallel to the start of the 27th UN Climate Change Conference in Egypt, the SPD met last weekend for a debate convention in Berlin. The transformation to a climate-friendly economy was top of the agenda for discussion. It’s a given, actually, that ambitious climate and transformation policy must have a strong social basis: climate change, overexploitation of natural resources and species extinction are increasingly perceived as a task for society as a whole due to their significant impact on all areas of life. Political opinion polls in recent years have consistently shown that a large majority of the population thinks combating climate change is of paramount importance.

Yet this awareness does not seem to suffice. Despite the significant risks posed by climate change, not only those ecological in nature but also increasingly social and political tensions (including national security), the goal of limiting global warming to 1.5 degrees Celsius appears increasingly out of reach, according to numerous voices from the scientific community. There is no lack of concrete policy proposals for successful socio-ecological change, illustrated by the fact that German social democracy understands the issue as a cornerstone of future-oriented policy and is engrossed in discussion about it.

However: socially, we are faced with a distribution and coordination problem. On the one hand, many people support the necessary transformation and expect decisive action. Yet many among them are unwilling to change their own behaviour in any fundamental way, much less renounce it altogether if necessary, as long as they perceive themselves to be part of a small engaged minority while others continue to enjoy the benefits of a carbon-fuelled lifestyle. Some, on the other hand, fear that they will lose out for their efforts and that, meanwhile, others are being spared the costs or even perhaps reaping undue profits from the transformation.

In terms of society as a whole, we therefore find ourselves in a prisoner's dilemma.[2] Each person has two choices: to cooperate or not to cooperate. The former means contributing to decarbonisation, shaping one's own behaviour and consumption choices in such a way that – if everyone else acted in the same way – we together would achieve the goal of climate neutrality by 2045. Alternatively, there is the option of not making any fundamental changes and thus avoiding not only additional costs but also sacrifices associated with effective decarbonisation. The dilemma lies in the fact that successful cooperation benefits everyone – even those who don’t contribute to climate protection. By contrast, failure to cooperate would mean that everyone is in trouble, including those who have indeed cooperated.

For many households, the switch to climate-friendly alternatives, e.g., for housing and mobility, would initially require significant investments that are often financially beyond many people’s means. If we miss climate targets due to a majority failure to cooperate, those households who did invest will have done so in vain – they would also be in even worse off in terms of protecting themselves from the negative consequences of climate change: investments in climate-friendly alternatives would severely limit their financial leeway, such that additional burdens due to material damages or negative health outcomes and rising living costs would become too great to bear. Against this backdrop, it is hardly surprising that the now widespread concern about climate change has not yet manifested itself in changes to basic behaviour.

This also carries over to the ballot box, where the prisoner's dilemma has direct effects on politics. The political challenge is therefore not limited to developing a plausible and climate-friendly strategy. It must be designed and communicated in such a way that it credibly conveys a fair distribution of transformation costs and benefits and thus strongly resonates within society.

Breaking out of the prisoner’s dilemma: state regulation

To stimulate the necessary cooperation, switching to climate-friendly alternatives must become more beneficial to the individual than avoiding the effort – regardless of what others are doing. The most effective means of shifting incentives is, unsurprisingly, regulatory guidance by the state. It is well known that provisions in the form of laws, requirements, taxes and subsidies make certain actions more or less attractive. Action to protect the climate already entails a great deal of regulations – CO2 pricing is a prominent example of this. However, as we must realise, the measures taken so far have simply not been enough to drive the vital developments in society at large and thereby exit the roundabout of doom. Our indicators are willingly signalling, but we’re still steering the wrong way. Clearer and bolder government regulation can ensure that climate costs are consistently internalised, and thus it is urgently needed. For cooperation to be truly successful, however, more redistributive policies are needed in addition to regulatory activity in order to ensure that climate neutrality and social justice are jointly approached.

Costs and benefits

Social cohesion as the basis for cooperation across society should not be taken for granted and is in fact increasingly being put to the test by current and forthcoming tensions. The decisive question is therefore both how to fairly distribute the costs of climate-friendly action but also the potential benefits. On the cost side, it is clear that internalising CO2 costs will initially result in real price increases across almost all areas of life. This will affect people with low incomes in particular, whose expenses for basic services will increase significantly in proportion to their income, as is already strongly the case in the current explosion in natural gas prices. Technological progress can have a mitigating effect in the long term. Nevertheless, it is more wishful thinking than a realistic assumption that in the short to medium term the enormous costs so far outsourced (to other states/to the future) can be fully offset by efficiency gains and other technological solutions. Thus, the question is not whether costs will rise. The question is: who pays for them? As long as there is an imbalance in the distribution of costs to the detriment of citizens in the middle and lower income brackets, a substantial proportion will not want to, let alone be able to, participate in climate protection. On top of that, many households find themselves in a quandary: on the one hand, they lack the necessary funds in the short term to invest in climate-friendly alternatives; on the other, they can no longer bear the rising costs of their CO2-intensive basic needs in the long term. A fair distribution of the resulting burdens within society is therefore crucial in order to win over households with medium and smaller incomes – without this balance, an ambitious climate policy just cannot gain majority support.

While the “cost prospects” will be spread across almost all of society, especially the low-paid, profit prospects are mainly limited to the wealthy. Investors and entrepreneurs can make huge profits when the market environment changes. New technologies and the sales of new products linked to them are already playing a major role in the transformation – and the change is, mind you, only just beginning. Shortages of raw materials, caused by ecological and political upheavals, will increase and enable speculative profits for investors. The list of potential gains is endless, but the population’s tolerance for rising income inequality is limited. Cooperation on a majority basis at all levels of society can only be guaranteed if there is a visible redistribution of profits through legal regulations, which leads to a reduction of the additional costs of climate-friendly behaviour and a noticeable relief of the most vulnerable in society. Diverting profit flows will not be enough, however; profits must also be generated directly where climate-friendly behaviour takes place.

The problem is that decarbonisation often goes hand in hand with doing things differently than we are used to: taking the train instead of the plane, choosing the vegetarian alternative, not buying a new mobile phone every year. The good news is: insofar as behavioural changes are possible at the individual level, this often leads directly to financial savings. Swapping an international vacation for a domestic holiday or skipping a weekend trip brings an immediate financial benefit. Yet, as long as the perceived sacrifice weighs more heavily, many people will not change their behaviour despite the savings. This is where the regulatory framework needs to ensure that the savings are not just marginal but indeed have a noticeable weight in the sum total. One way of doing so is to make climate-friendly behaviour significantly cheaper, for example, by reforming VAT with sustainability in mind.

It is clear that tangible changes in cost-benefit distribution are needed – this is it the only way climate protective action can truly become the dominant strategy, and the only way to avert the tremendous destruction resulting from unchecked climate change. Even if such changes can be made to work through concessions rather than price increases, they still require a significant redistribution to mobilise the necessary resources. Since such changes have a strong impact on the whole of society, they represent powerful political intervention that will only be accepted if people from all parts of society are actively involved in political decision-making.

Policy is not enough: politics and society in dialogue for a new social contract

Greater levels of social acceptance require interlinking of top-down and bottom-up processes. Initiatives coming from the government level such as the Alliance for Transformation are an important first step.. The exchange between leaders from science, business, trade unions and associations on the topic of societal transformation and shaping the future brings diverse perspectives to the table and improves the prospects for cooperation among all those represented by the dialogue partners. However, in such formats, the voices of citizens under-represented in social discourse, such as those from structurally weak regions, hardly get heard. Thus, a great many people lack the opportunity to have their say in the political decision-making process – instead, they are confronted with the results, which can decrease their willingness to cooperate. What is needed therefore is a framework offering everyone the opportunity to gain an overview of the scientific findings and ecological facts, to contribute their own perspective to the social discourse and thus to participate in shaping a vision for transformation. Various dialogue formats such as town hall discussions and citizens' councils are being tested and organisedlocally with a plenty of success, but also on a larger scale. Questions about the form, degree of concretisation and scope of the transformation dialogue need to be discussed in further works. It is clear, however, that questions about the distribution of costs and benefits, about the role of the state as a guiding force and the role of each individual in society must be addressed.

The next step is for the results from the individual groups to be incorporated into the political transformation design – not as interesting side information for decision-makers, but as an important basis for their political strategies. Comprehensive exchange with the people at large represents a huge opportunity: it illustrates which political measures have the potential to make cooperation the dominant strategy across the population and which conditions create a broad alignment between politics and society. Such social exchange arguably is very costly, especially if it is meant to offer as many individual stakeholders as possible the opportunity to participate. However, given the significant environmental and social consequences we face if we fail to cooperate, every joint effort to overcome the prisoner's dilemma is of utmost importance.

The triad of climate protection

The key to majority cooperation for successful climate protection therefore has three components: First, climate-friendly actions must be made attractive through stronger government regulation, so that climate-friendly consumption also becomes pocketbook-friendly. Secondly, comprehensive cost-benefit equalisation must ensure that low-income households can both make the necessary investments to reduce their carbon footprint and bear the increased costs on an ongoing basis. At the same time, a socially just balance ensures that no profits can be made at the expense of others and that the willingness to cooperate increases among people from the middle and lower income strata. Thirdly, in order for stronger regulation and cost redistribution to be supported by as broad an alliance as possible, there needs to be a dialogue across society. The more people actively participate in the design process, the broader the social contract, the more people will also support the relatively strong political interventions and translate them into individual behavioural changes. We are caught in the dilemma as long as we only talk among our small circles and change our behaviour in small ways. All three aspects – a proactive state, social justice and an active role for citizens – are core concerns of social democracy. For this very reason, and also because of its broad roots in different social milieus, social democracy has a key role to play in the transformation process. Social democracy must now succeed in translating its basic convictions into fair policy concepts and credible communication and enter into a broad social discourse.