Has climate policy peaked? The rise and fall of a political cause - The Mandarin

The Mandarin - David Stadelmann    Benno Torgler

Big promises are fading.
Adaptation, proven tech, and smarter climate change policies
are taking centre stage in Australia.

Environment Minister Murray Watt. (AAP Image/Fraser Barton)

Authors David Stadelmann is a professor of economics at the University of Bayreuth, Germany; a senior fellow at the Institute for Swiss Economic Policy; a fellow at the Center for Research in Economics, Management and the Arts; a fellow at the ARC Training Centre for Behavioural Insights for Technology Adoption; a fellow at the Ostrom Workshop, Indiana University; and a member of the Walter Eucken Institute.  Benno Torgler is a professor of economics at the School of Economics and Finance, QUT, and the Director of the ARC Training Centre for Behavioural Insights for Technology Adoption. He is also a senior fellow at the Institute for Swiss Economic Policy, a fellow at the Center for Research in Economics, Management and the Arts, and a fellow of the CESifo Research Network and the Global Labor Organization.

Australia has long been a proving ground for climate policy.

Governments have announced ambitious targets, introduced complex regulatory schemes, and committed substantial subsidies to renewable energy. Outcomes, however, are mixed. 

Australia remains one of the world’s largest coal exporters. Although coal-fired generation is declining, the pace of the transition to wind, solar, and storage has been slower than anticipated, and the rollout of electricity generation and transmission infrastructure is struggling to meet the 2030 target.

Debates intensified with the release of the National Climate Risk Assessment in 2025, presented as a sober appraisal of future risks. 

However, critics argued that the report relies on implausible scenarios of runaway coal use and global population growth, citing disaster cost projections attributed to climate change, even though an underlying review links rising losses primarily to increased population and property exposure rather than Australian CO₂ emissions. 

Such framing may generate headlines but risks undermining credibility and the international collaboration that effective climate policy would require.

Climate protection is the textbook case of a global public good: non-rivalry and non-excludability create strong incentives to free ride, leading to suboptimal collective outcomes. 

Unilateral Australian policies and actions have negligible direct effects on global temperatures; their value rests largely on demonstration, technology development, and diplomatic leverage rather than on measurable climate impacts per se. 

Countries and individuals who cut emissions bear the costs themselves, while the benefits are distributed worldwide. The incentives for any one country to act independently and substantially are therefore weak. Citizens care less about the global average temperature than about the local consequences — what they experience in their own environment.

Although international agreements could, in theory, solve this dilemma, in practice, they have so far failed to deliver fully. Many signatory states are authoritarian or unwilling to implement costly treaties. Democratic countries also retreat when domestic costs bite, as the United States did when it temporarily withdrew from the Paris Agreement under President Trump.

Behavioural and political economy considerations

There is evidence that 'peak climate policy' may already have passed in many jurisdictions, and Australia may not be an exception. A behavioural economics and political economy lens helps explain why enthusiasm is cooling after years of moralised rhetoric about existential risk. Governments and voters now confront high fiscal costs, limited near-term climate benefits, and costly economic distortions created by complex policy instruments. 

As competing priorities — defence, pensions, infrastructure — press on limited budgets, grand narratives are giving way to more modest, pragmatic debate. Two questions follow: how climate policy rose to public prominence, and why doubts are now growing.

How climate policy rose to the top

Until recently, climate protection dominated public discourse around the world and particularly in Europe. National politicians and representatives of the United Nations warned of an 'existential threat' and 'the greatest challenge in human history'. Yet, despite the warnings and massive climate protests, fossil fuel use, global greenhouse gas emissions, and average temperatures continue to rise. By contrast, climate protests have dwindled, if not disappeared; only media attention to 'climate catastrophes' has not yet waned.

In the 1990s, it seemed unlikely that climate protection would become a guiding political theme. Reducing CO₂ emissions and other greenhouse gases imposes immediate costs, while the benefits are distant and uncertain. Politics and society generally prefer the opposite: benefits first, costs later. Despite these obstacles, climate protection became a dominant political cause, influencing elections and mobilising the streets. 

Modern politics, combined with behavioural economics, helps explain why: the harder a problem is to solve and the longer it persists, the more it lends itself to being a political and moral topic. Thus, climate protection became a business and climate change offered opportunities for spending, regulation and posture, with limited accountability for results. Six mechanisms were central.

1. Expressive behaviour. Because one nation’s contribution to emissions hardly matters for climate change, the effectiveness of its emissions reduction policies is almost irrelevant. Public discourse thus revolved not around efficiency but around climate change as a moral issue. Governments pledged long-term 'net zero' targets decades away, while the true costs would fall on future administrations. 
   Symbolism, not substance, often dominated. In Australia, periodic ratcheting of targets fits this pattern. The latest goal — cutting emissions by 62–70% below 2005 levels by 2035 — may prove overly ambitious. Emissions are currently about 28% below 2005 levels, with only modest progress in recent years. Critical assessments have followed.
2. Beneficiaries in politics. Politicians who championed climate policy early gained moral authority and media dominance. Criticism was often dismissed as immoral or 'anti-science', even though it was clear from the start that climate protection could only work globally, not merely nationally. At the same time, subsidies and levies expanded government revenue and offered room for patronage. Climate protection became a platform for redistribution and client politics.
3. New sources of money. Early climate measures and promises created immediate business opportunities. It is estimated that the electricity sector would require substantial capital investment to cover essential electricity infrastructure by 2050. Subsidies for wind and solar, along with government contracts, fuelled new industries that profited from the money. 
   Other companies thrived on selling 'sustainable' products, consulting and certification services. Australia’s renewable energy subsidies have produced fortunes for a few, while leaving ordinary households with mounting bills.
4. Bureaucracy loves regulation. Each new climate initiative generated tasks for departments, agencies and regulators. As mandates and compliance regimes multiplied, Australia’s dual layers of Commonwealth and state authority made duplication and jurisdictional overlap more likely, driving up administrative complexity and costs.
5. Scapegoating. Climate change provided a convenient excuse for national policy failures. Following floods or bushfires, leaders often face pressure to 'do something', a classic action bias in behavioural economics, and the attribution question — 'was this climate change?' — can crowd out harder discussions about planning, land use and hazard management. In Australia, national leaders faced backlash during the 2019 bushfire crisis for declining to engage substantively with climate questions.
6. Passing on costs. Climate-related regulations raised costs for companies, but because their competitors nationally and in several Western countries faced similar regulations, those costs were often passed on to consumers. In some cases, firms profited. Australia’s Safeguard Mechanism and renewable obligations can produce analogous dynamics where consumers shoulder costs and industries find ways to profit.

The turn: Why climate policy is losing steam

Now, however, the underlying economic logic is reasserting itself: genuine climate protection to reduce global warming would require effective global cooperation. But this global cooperation has failed to materialise in practice, even though many climate treaties have been signed and numerous climate conferences have been held. 

After years of political grandstanding, ambitious policy targets, and vast amounts of subsidies, the climate issue is now losing its appeal. Six developments explain why 'peak climate policy' has likely already passed.

1. The return to cost-benefit realism. More than 30 years after the Kyoto Protocol, politically set climate targets are drawing nearer, and the costs of compliance are rising rapidly. Moralising slogans are giving way to more sober cost-benefit analysis. Many citizens are noticing how inefficient and expensive past strategies have been and how little they have contributed to slowing climate change.
2. Competition from other pressing issues. As the climate discourse loses its 'monopoly' in public debate, other priorities take centre stage: ageing populations, pension security, and defence spending in an unstable geopolitical world. In Australia, billions for renewable subsidies will compete with other funding such as defence. The war in Ukraine has shifted political and public opinion to view defence as, in the short run, a larger priority than climate change.
3. Everything is relative. Climate damages can look frightening in absolute terms. But relative to growing economic output, they are relatively modest. Sound economic policy that generates decent growth rates has the potential to offset much of the negative impact of climate change. Recent evidence reports an environmental-Kuznets-type pattern: as incomes rise, environmental pressures tend to intensify initially and then diminish.
4. A change of perspective. Knowledge about climate change and climate science has advanced. People recognise that the 1.5°C 'target' of the Paris Agreement is increasingly difficult; it has always been challenging from a socio-economic perspective. They also understand that today’s especially rich societies have far greater capacity to cope with change than in 1850.
5. Adaptation instead of prevention. Since large-scale global emissions cuts remain unlikely in the near future, adaptation is moving to the forefront of the debate. Unlike distant promises of prevention, adaptation delivers immediate, tangible benefits. Investments in infrastructure, cooling technologies, water management, and urban design are visible, practical, and often cost effective. 
   In Australia, measures such as risk-appropriate zoning, fuel management, and improved land use likely deliver greater near-term payoff than symbolic targets.
6. Climate technologies. New approaches, such as carbon removal or geo-engineering (for example, enhanced weathering), are drawing growing attention. Their complexity brings 'known unknowns', such as potential effects on the global water cycle and other Earth-system feedbacks, but support for model-based research and robust governance frameworks is increasing. 
   Politically, the prospect of technological breakthroughs can be attractive because it signals progress without immediate economy-wide sacrifices.

Toward rational policy

Thus, global climate protection, until recently cast as humanity’s defining task, is increasingly giving way to approaches that are more realistic, tangible, and enforceable. The key question is whether a better economic design is available.

The answer proposed is efficient cost transparency. Every country could adopt a universal CO₂ price. Such a mechanism would create the right incentives for producers and consumers without relying on subsidies, mandates, or complex regulations. Revenues could be returned to citizens, for example via tax reductions on labour or consumption. 

This approach would be more efficient and more socially acceptable. The burden of a universal carbon price would be far lower than today’s labyrinth of subsidies and levies. Internationally, a simple and universal mechanism offers the best chance for effective cooperation.

Yet a CO₂ price that displaces subsidies and regulations deprives politicians, bureaucrats, and favoured industries of their privileges. The welfare-enhancing path remains blocked — not by economic logic, but by political incentives.

A mature approach

Climate change is real. But the politics of climate change — often marked by apocalyptic rhetoric, moral posturing, and costly symbolism — appears to have peaked. The experiences show both zeal and flaws: contested projections, generous subsidies, and rising household costs. Around the world, voters are beginning to ask harder questions, weighing real trade-offs, and prioritising issues closer to home.

What lies ahead is not the end of climate policy, but its transformation: fewer exaggerations and grand promises, more emphasis on adaptation and proven technologies, and potentially a shift toward economic and behavioural rationality via transparent, economy-wide pricing of emissions. 

Welcoming this shift is not cynicism; it is policy maturity — the recognition that effective climate action is less about headlines and more about solving problems efficiently, transparently and fairly.

Links

• Climate turning point
• Reinvestigating the environmental Kuznets curve (EKC) of carbon emissions and ecological footprint in 147 countries: a matter of trade protectionism
• Air Conditioning Usage by Country 2025
• Australia’s 2035 climate target is coming. Here’s how we’ll know if it’s good enough

• Australia's first National Climate Risk Assessment
• What happened to the youth climate movement?
• No room for the timid: setting Australia’s 2035 emissions target is a daring tightrope act
• Transport will make or break Australia’s new climate plan – and time is running out to fix it
• Is climate change to blame for Australia's bushfires?

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