Climate Carrots or Climate Sticks? Governments Need Both, And So Does Your Business

How can we change people’s behaviour in a more sustainable direction? Claire Seaborn, Chief of Staff to Canada’s Minister of Natural Resources, explains how strategies for climate carrots, climate sticks, and climate courage can be implemented.

To fight climate change, we need to change behaviour. The behaviours of governments, business and people are changed in response to either an incentive or a disincentive. Put another way, climate policy-makers can either incentivize behavioural change with rewards, or nudge society in a more sustainable direction with penalties. These are called climate carrots and climate sticks.  

Climate Carrots

Unsurprisingly, people prefer climate carrots – the Government of Canada is providing electric vehicle rebates, tree planting programs, building retrofit grants, renewable energy programs, subsidized public transit, below-market green loan schemes, low-carbon tax credits, and investments in clean technology.  

Businesses may provide free bicycle parking, reduce energy prices at off-peak times, or give bonuses to employees who help reduce the companies’ carbon emissions. These are the more popular climate policies that are generally less cost-effective in reducing emissions but keep the public onside with fighting climate change.  

Climate Sticks

However, a recent US study published in the Journal of Environmental Psychology suggests that people are more willing to tolerate climate sticks than previously thought, particularly when those disincentives target businesses and institutions. For the Government of Canada, this has meant implementing vehicle emission regulations, green building codes, resource project assessments, and strict standards for high-emitting industries. While less popular, these climate sticks are generally more cost-effective for taxpayers and are essential to Canada meeting its global emissions targets.  

Businesses are even less likely than governments to adopt climate sticks – setting strict standards for GHG performance by their subsidiaries, penalizing workers with lower environmental performance, divesting from high-emitting industries. Encouragingly, this research also indicates that people are driven, at least in part, by perceived effectiveness of climate policies. Could this mean that as the urgency of the climate crisis accelerates, climate sticks are becoming more popular?  

Climate Courage

After a decade of law and policy work in this space, I am convinced that all governments and businesses need to take on both climate carrots and climate sticks, and strike the right balance between them, to reduce emissions and become more resilient to climate hazards.  

Canada’s carbon pricing system is a prime example of doing both at the same time since the backstop puts a price on emissions while providing a rebate as an incentive. While many tout the recently passed US Inflation Reduction Act as ‘all carrots, no sticks,” a few sneaky sticks like the methane-emissions fee or Environmental Protection Agency reforms – still found their way in there.  

And all this requires what I like to call ‘climate courage’. Courage to do the popular things, the unpopular things, the small things, the big things and everything in between. So governments of every level and businesses of every size: What are you doing to put in place climate carrots and sticks?