Editing IPCC:AR6/WGII/Chapter-18 (section)

==== 18.4.3.5 Community Arenas ====

<div id="h3-20-siblings" class="h3-siblings"></div>

Societal choices and development trajectories emerge from decisions made in different arenas which intersect and interact across levels and scales, in diverse institutional settings—some formal with their associated instruments and interventions, while others are informal. Since AR5, both formal and informal setting are increasingly arenas of debate and contestation regarding development choices and pathways ( ''very high confidence'' ) ( [[#18.4.4|Section 18.4.4]] , Chapters 1, 6, 8, 10 and 17). Community arenas exist from the local to the global scale and constitute the many interactions between governance actors, often transcending any one scale to reflect the emergent outcomes of interactions in political, economic, socio-cultural, knowledge-technology and ecological arenas of engagement. Actions within and between these five arenas hence come together in the community arena of engagement. While community engagement is often described at the level of villages and cities ( [[#Ziervogel--2021|Ziervogel et al., 2021]] ) (Chapter 8), communities in terms of people interacting with each other sharing worldviews, values and behaviours, also exist at the regional and global levels. For example, civil society engagement in climate action reached a peak in 2019, notably through the global youth movement which led to large global mobilisation and street demonstrations on all continents and in many large cities ( [[#Bandura--2020|Bandura and Cherry, 2020]] ; [[#Han--2020|Han and Ahn, 2020]] ; [[#Martiskainen--2020|Martiskainen et al., 2020]] ). Calling for enhanced climate action by governments and other societal actors, the youth movement was supported by many other societal groups and networks, including arenas of community interaction.

While the SR1.5 ( [[#de%20Coninck--2018|de Coninck et al., 2018]] ) for the first time comprehensively assessed behavioural dimensions of climate change adaptation, most literature still has a greater focus on what triggers mitigation behaviour ( [[#Lorenzoni--2014|Lorenzoni and Whitmarsh, 2014]] ; [[#Clayton--2015|Clayton et al., 2015]] ). Meanwhile, with CRD still a relatively young concept, there is little literature focused on what motivates action in pursuit of CRD rather than its sub-components of climate action and sustainable development. Nevertheless, a common motivation that is emerging in the literature is clinically significant levels of climate distress among individuals ( [[#Bodnar--2008|Bodnar, 2008]] ), which is experienced as a continuing distress over a changed landscape which no longer offers solace, also known as solastalgia ( ''high agreement'' , ''medium evidence'' ) ( [[#Albrecht--2007|Albrecht et al., 2007]] ). This is accompanied by a shift from blaming natural forces for disasters to attributing it to human negligence, which is known to lead to more acute perceptions of risk as well as more prolonged post-traumatic stress disorder (PTSD) than trauma arising from non-human causes. Improving social connections, acknowledging anxiety, reconnecting to nature and finding creative ways to re-engage are identified as ways of managing this growing anxiety ( [[#Lertzman--2010|Lertzman, 2010]] ; [[#Clayton--2017|Clayton et al., 2017]] ). Climate action in communities at various scales could fulfil many of these needs.

<div id="cross-chapter-box-indig" class="h2-container box-container"></div>

'''Cross-Chapter Box INDIG | The Role of Indigenous Knowledge and Local Knowledge in Understanding and Adapting to Climate Change'''
<div id="h2-29-siblings" class="h2-siblings"></div>

Authors: Tero Mustonen (Finland), Sherilee Harper (Canada), Gretta Pecl (Australia), Vanesa Castán Broto (Spain), Nina Lansbury (Australia), Andrew Okem (Nigeria/South Africa), Ayansina Ayanlade (Nigeria), Jackie Dawson (Canada), Pauline Harris (Aotearoa-New Zealand), Pauliina Feodoroff (Finland), Deborah McGregor (Canada)

Indigenous knowledge refers to the understandings, skills and philosophies developed by societies with long histories of interaction with their natural surroundings ( [[#UNESCO--2018|UNESCO, 2018]] ; [[#IPCC--2019a|IPCC, 2019a]] ). Local knowledge refers to the understandings and skills developed by individuals and populations, specific to the places where they live ( [[#UNESCO--2018|UNESCO, 2018]] ; [[#IPCC--2019a|IPCC, 2019a]] ). Indigenous knowledge and local knowledge are inherently valuable but have only recently begun to be appreciated and in western scientific assessment processes in their own right ( [[#Ford--2016|Ford et al., 2016]] ). In the past these often endangered ways of knowing have been suppressed or attacked ( [[#Mustonen--2014|Mustonen, 2014]] ). Yet these knowledge systems represent a range of cultural practices, wisdom, traditions and ways of knowing the world that provide accurate and useful climate change information, observations and solutions ( ''very high confidence'' ) (Table Cross-Chapter Box INDIG.1). Rooted in their own contextual and relative embedded locations, some of these knowledges represent unbroken engagement with the earth, nature and weather for many tens of thousands of years, with an understanding of the ecosystem and climatic changes over longer-term timescales that is held both as knowledge by Indigenous Peoples and local peoples, as well as in the archaeological record ( [[#Barnhardt--2005|Barnhardt and Angayuqaq, 2005]] ; [[#UNESCO--2018|UNESCO, 2018]] ).

Indigenous Peoples around the world often hold unique worldviews that link today’s generations with past generations. In particular, many Indigenous Peoples consider concepts of responsibility through intergenerational equity, thereby honouring both past and future generations ( [[#Matsui--2015|Matsui, 2015]] ; [[#McGregor--2020|McGregor et al., 2020]] ). This can often be in sharp contrast to environmental valuing and decision making that occurs in Western societies ( [[#Barnhardt--2005|Barnhardt and Angayuqaq, 2005]] ). Therefore, consideration of Indigenous knowledge and local knowledge needs to be a priority in the assessment of adaptation futures ( [[#Nakashima--2012|Nakashima et al., 2012]] ); [[#Ford--2016|Ford et al., 2016]] ) (Chapter 1), although adequate indigenous cultural and intellectual property rights require legal and non-legal measures for recognition and protection ( [[#Janke--2018|Janke, 2018]] ).

Indigenous knowledge and local knowledge are crucial to address environmental impacts, such as climate change, where the uncertainty of outcome is high and a range of responses are required ( [[#Mackey--2015|Mackey and Claudie, 2015]] ). However, working with this knowledge in an appropriate and ethically acceptable way can be challenging. For instance, questions of data ‘validity’ and the requirement to communicate such knowledge in the dominant language can lead to inaccurate portrayals of Indigenous knowledge as inferior to science. This may overlook the uniqueness of Indigenous knowledge and then lead to the overall devaluation of indigenous political economies, cultural ecologies, languages, educational systems and spiritual practices ( [[#Smith--2013|Smith, 2013]] ; [[#Sillitoe--2016|Sillitoe, 2016]] ; [[#Naude--2019|Naude, 2019]] ; [[#Barker--2020|Barker and Pickerill, 2020]] ). Furthermore, Indigenous knowledge is too often only sought superficially—focusing only on the ‘what’, rather than the ‘how’ of climate change adaptation and/or seen through the lenses of ‘romantic glorification’ leaving little room for the knowledge to be expressed as authored by the communities and knowledge holders themselves ( [[#Yunkaporta--2019|Yunkaporta, 2019]] ).

'''Multiple knowledge systems and frameworks'''
Indigenous knowledge systems include not only the specific narratives and practices to make sense of the world, but also profound sources of ethics and wisdom. They are networks of actors and institutions that organise the production, transfer and use of knowledge ( [[#Löfmarck--2017|Löfmarck and Lidskog, 2017]] ). There is a pluralism of forms of knowledge that emerge from oral traditions, local engagement with multiple spaces, and Indigenous cultures ( [[#Peterson--2018|Peterson et al., 2018]] ). Recognising such multiplicity of forms of knowledge has long been an important concern within sustainability science ( [[#Folke--2016|Folke et al., 2016]] ). Less dominant forms of knowledge should not be put aside because they are not comparable or complementary with scientific knowledge ( [[#Brattland--2018|Brattland and]] [[#Mustonen--2018|Mustonen, 2018]] ; [[#Mustonen--2018|Mustonen, 2018]] ; [[#Ford--2020|Ford et al., 2020]] ; [[#Ogar--2020|Ogar et al., 2020]] ). Instead, Indigenous knowledge and local knowledge can shape how climate change risk is understood and experienced, the possibility of developing climate change solutions grounded in place-based experiences, and the development of governance systems that match the expectations of different Indigenous knowledge and local knowledge holders ( ''very high confidence'' ).

Different frameworks that enable the inclusion of Indigenous knowledge have emerged from efforts to utilise more than one knowledge system ( ''robust evidence'' , ''high agreement'' ). For example, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has developed a ‘nature’s contribution to peoples’ framework that provides a common conceptual vocabulary and structural analysis ( [[#Díaz--2015|Díaz et al., 2015]] ; [[#Tengö--2017|Tengö et al., 2017]] ; [[#Díaz--2018|Díaz et al., 2018]] ; [[#Peterson--2018|Peterson et al., 2018]] ). The IPBES approach complements other efforts to study areas of intersection between scientific and indigenous worldviews ( [[#Barnhardt--2005|Barnhardt and Angayuqaq, 2005]] ; [[#Huaman--2015|Huaman and Sriraman, 2015]] ) or ‘boundaries’ that illustrate ‘blind spots’ in scientific knowledge ( [[#Cash--2003|Cash et al., 2003]] ; [[#Clark--2016|Clark et al., 2016]] ; [[#Brattland--2018|Brattland and]] [[#Mustonen--2018|Mustonen, 2018]] ). These frameworks highlight areas of collaboration but provide less guidance in areas where sources of evidence conflict across different knowledge systems ( [[#Löfmarck--2017|Löfmarck and Lidskog, 2017]] ). These experiences suggest that the inclusion of Indigenous knowledge and local knowledge in international assessments may transform the process of assessment of scientific, technical and socioeconomic evidence ( ''medium evidence'' , ''high agreement'' ). These knowledge systems also point to novel discoveries that may be still unknown to the scientific world but have been known by communities for millennia (Mustonen and [[#Feodoroff--2020|Feodoroff, 2020]] ).

<div id="_idContainer038" class="Box_Header-continued"></div>

Cross-Chapter Box INDIG

'''The importance of free and prior-informed consent'''
Obtaining free and prior-informed consent is a necessary but not sufficient condition to engage in knowledge production with Indigenous Peoples ( [[#Sillitoe--2016|Sillitoe, 2016]] ). Self-determination in climate change assessment, response and governance is critical ( [[#Chakraborty--2021|Chakraborty and Sherpa, 2021]] ), and Indigenous Peoples are actively contributing to respond to climate change ( [[#Etchart--2017|Etchart, 2017]] ). Climate change assessment and adaptation should be self-determined and led by Indigenous Peoples, acknowledge the importance of developing genuine partnerships, respect Indigenous knowledge and ways of knowing, and acknowledge Indigenous Peoples as stewards of their environment ( [[#Country--2016|Country et al., 2016]] ; [[#Country--2018|Country et al., 2018]] ; [[#ITK--2019|ITK, 2019]] ; [[#Barker--2020|Barker and Pickerill, 2020]] ; [[#Chakraborty--2021|Chakraborty and Sherpa, 2021]] ). Supporting Indigenous Peoples’ leadership and rights in climate adaptation options at the local, regional, national and international levels is an effective way to ensure that such options are adapted to their living conditions and do not pose additional detrimental impacts to their lives ( ''very high confidence'' ). [https://www.ipcc.ch/report/ar6/wg2/chapter/chapter-18 Chapter 18] shows that the transformations required to deliver climate-resilient futures will create societal disruptions, with impacts that are most often unevenly experienced by groups with high exposure and sensitivity to climate change, including Indigenous Peoples and local communities ( [[#Schipper--2020a|Schipper et al., 2020a]] ). Climate-resilient futures depend on finding strategies to address the causes and drivers of deep inequities (Chapter 18). For example, climate-resilient futures will depend on recognising the socioeconomic, political and health inequities that often affect Indigenous Peoples (Mapfumo et al., 2016; [[#Ludwig--2018|Ludwig and Poliseli, 2018]] ) ( ''very high confidence'' ).

'''International conventions to support and utilise Indigenous knowledge and local knowledge'''
Several tools within international conventions may support instruments to develop equitable processes that facilitate the inclusion of Indigenous knowledge and leadership in climate change adaptation initiatives. The International Labour Convention 69 recognised Indigenous People’s right to self-determination in 1989 ( [[#ILO--1989|ILO, 1989]] ). The United Nations’ Declaration on the Rights of Indigenous Peoples ( [[#United%20Nations--2007|United Nations, 2007]] ) includes articles on the right to development (Article 23), the right to maintain and strengthen their distinctive spiritual relationship and to uphold responsibilities to future generations (Article 25), and the right to the conservation and protection of the environment and the productive capacity of their territories (Article 29). Article 26 upholds the right to the lands, territories and resources, the right to own, use, develop and control the lands, and legal recognition and protection of these lands, territories and resources. Indigenous Peoples are also recognised within the Sustainable Development Goals as a priority group ( [[#Carino--2019|Carino and Tamayo, 2019]] ). International events such as the ‘Resilience in a time of uncertainty: Indigenous Peoples and Climate Change’ conference brought together Indigenous Peoples’ representatives and government leaders from around the world to discuss the role of Indigenous Peoples in climate adaptation (UNESCO, 2015).

'''The value of Indigenous knowledge and local knowledge in climate adaptation planning'''
There have been increasing efforts to enable Indigenous knowledge holders to participate directly in IPCC assessment reports ( [[#Ford--2012|Ford et al., 2012]] ; [[#Nakashima--2012|Nakashima et al., 2012]] ; [[#Ford--2016|Ford et al., 2016]] ). Adaptation efforts have benefited from the inclusion of Indigenous knowledge and local knowledge ( [[#IPCC--2019e|IPCC, 2019e]] ) ( ''very high confidence'' ). Moreover, it has been recognised that including Indigenous knowledge and local knowledge in IPCC reports can contribute to overcoming the combined challenges of climate change, food security, biodiversity conservation, and combating desertification and land degradation ( [[#IPCC--2019c|IPCC, 2019c]] ) ( ''high confidence'' ). Limiting warming to 1.5°C necessitates building the capability of formal assessment processes to respect, include and utilise Indigenous knowledge and local knowledge ( [[#IPCC--2018a|IPCC, 2018a]] ) ( ''medium evidence'' , ''high agreement'' ).

However, these efforts have been accompanied by a recognition that ‘integration’ of Indigenous knowledge and local knowledge cannot mean that those knowledge systems are subsumed or required to be validated through typical scientific means ( [[#Gratani--2011|Gratani et al., 2011]] ; [[#Matsui--2015|Matsui, 2015]] ). Such a critique of ‘validity’ can be inappropriate, unnecessary, can disrespect Indigenous Peoples’ own identities and histories, limits the advancement and sharing of these perspectives in the formal literature, and overlooks the structural drivers of oppression and endangerment that are associated with Western civilisation ( [[#Ford--2016|Ford et al., 2016]] ). Moreover, by underutilising Indigenous knowledge and local knowledge systems, opportunities that could otherwise facilitate effective and feasible adaptation action can be overlooked. We should also reserve space for the understanding that each cultural knowledge system, building on linguistic-cultural endemicity, is unique and inherently valuable.

Indigenous Peoples have often constructed their ways of knowing using oral histories as one of the vehicles of mind and memory, observance, governance and maintenance of customary law (Table Cross-Chapter Box INDIG.2). These ways of knowing can also incorporate the relationships between multiple factors simultaneously which adds particular value towards understanding complex systems that is in contrast to the dominant reductionist, Western approach, noting that non-reductionist approaches also exist ( [[#Ludwig--2014|Ludwig et al., 2014]] ; [[#Hoagland--2017|Hoagland, 2017]] ).

<div id="_idContainer039" class="Box_Header-continued"></div>

Cross-Chapter Box INDIG

For climate research, the role of oral histories as a part of Indigenous knowledge and local knowledge is extremely relevant. For example, ocean adaptation initiatives can be guided by oral historians and keepers of knowledge who can convey new knowledge and baselines of ecosystem change over long-time frames ( [[#Nunn--2016|Nunn and Reid, 2016]] ). Oral histories can also convey cultural indicators and linguistic devices of species identification as a part of a local dialect matrix, and changes in ecosystems and species using interlinkages not available to science ( [[#Mustonen--2013|Mustonen, 2013]] ; [[#Frainer--2020|Frainer et al., 2020]] ). Oral histories attached to maritime place names, especially underwater areas ( [[#Brattland--2011|Brattland and Nilsen, 2011]] ), can position observations relevant for understanding climate change over long ecological timeframes ( [[#Nunn--2016|Nunn and Reid, 2016]] ). Species abundances, well-being and locations are some of the examples present in the ever-evolving oral histories as living ways of knowing. Indigenous knowledge and oral histories may also have the potential to convey governance, moral and ethical frameworks of sustainable livelihoods and cultures ( [[#Mustonen--2020|Mustonen and Shadrin, 2020]] ) rooted in the particular Indigenous or local contexts that are not otherwise available in written or published forms.

Climate change research involving Indigenous Peoples and local communities has shown that the generation, innovation, transmission and preservation of Indigenous knowledge is threatened by climate change ( [[#Kermoal--2016|Kermoal and Altamirano-Jiménez, 2016]] ; [[#Simonee--2021|Simonee et al., 2021]] ). This is because Indigenous knowledge is taught, local knowledge is gained through experience, and relationships with the land are sustained through social engagement within and among families, communities and other societies (Tobias J.K, 2014; [[#Kermoal--2016|Kermoal and Altamirano-Jiménez, 2016]] ). The knowledge that has traditionally been passed on in support of identity, language and purpose has been disrupted at an intergenerational level ( [[#Lemke--2017|Lemke and Delormier, 2017]] ). Many of these dynamics have affected local knowledge transfers equally ( [[#Mustonen--2013|Mustonen, 2013]] ). This scenario represents a tension for Indigenous Peoples, where Indigenous knowledge in the form of land-based life ways, languages, food security, intergenerational transmission and application are threatened by climate change, yet in parallel, these same practices can enable adaptation and resilience ( [[#McGregor--2020|McGregor et al., 2020]] ).

<div id="_idContainer040" class="Box_Header-continued"></div>

Cross-Chapter Box INDIG

'''Table Cross-Chapter Box INDIG.1 |''' Examples of Indigenous knowledge and local knowledge about climate change used in this Assessment Report

{| class="wikitable"
|-
! '''Issue'''

! '''Examples of Indigenous Peoples’ and local communities’ action'''

! '''Context, peoples and location'''

! '''Source'''

|-
| rowspan="4"| Climate forecasting/early warning

| Phenological cues to forecast and respond to climate change

| Smallholder farmers, Delta State, Nigeria

| rowspan="2"| Chapter 9

|-
| Forecasting of weather and climate variation through observation of the natural environment (e.g., changes in insects and wildlife).

| Afar pastoralists, north-eastern Ethiopia

|-
| Observation of wind patterns to plan response to coastal erosion/flooding

| Inupiat, Alaska, USA

| Chapter 14

|-
| Sky and moon observation to determine the onset of rainy season

| Maya, Guatemala

| Chapter 12

|-
| Fire hazards

| Prescribed burning

| Indigenous nations in Venezuela, Brazil, Guyana, Canada and USA

| Chapter 12

Chapter 14

|-
| rowspan="3"| Crop yield/food security

| Water management, native seeds conservation and exchange, crop rotation, polyculture and agroforestry

| Mapuche, Chile

| Chapter 12

|-
| Crop association (milpa) agroforestry, land preparation and tillage practices, native seed selection and exchange, adjusting planting calendars

| Maya, Guatemala

| Chapter 12

|-
| Harvesting rainwater and the use of maize landraces by Indigenous farmers to adapt to climate impacts and promote food security in Mexico

| Yucatán Peninsula, Mexico

| Chapter 14

|-
| Livelihood and well-being

| Cultural values ingrained in knowledge system: reciprocity, collectiveness, equilibrium and solidarity

| Quechua, Cusco, Peru

| Chapter 12

|-
| rowspan="3"| Ecosystem degradation

| Ecosystem restoration including rewilding

| Sámi, Nenets, and Komi, Scandinavia and Siberia

| Chapter 13

|-
| Collaboration with researchers, foresters and landowners to manage native black ash deciduous trees against emerald ash borer

| Indigenous Nations in Canada and USA

| Chapter 14

|-
| Selection and planting of native plants that reduce erosion

Whole-of-island approaches that embed Indigenous knowledge and local knowledge in environmental governance

| Small Islands States (as defined by Chapter 15)

| Chapter 15

|-
| Fisheries

| Traditional climate-resilient fishing approaches

| Indigenous nations across North America and the Arctic

| Chapter 14

CCP6

|-
| Management of urban resources

| Restoration of traditional network of water tanks

| Traditional communities and activists in South Indian cities such as Bengaluru

| Chapter 6

|}

'''Table Cross-Chapter Box INDIG.2 |''' Case study summary

{| class="wikitable"
|-
! '''Region'''

! '''Summary'''

|-
| '''Africa'''

| Many rural smallholder farmers in Africa use their ingrained Indigenous knowledge systems to navigate climatic changes as many do not have access to Western systems of weather forecasting. Instead, these farmers have been reported to use observations of clouds and thunderstorms, and migration of local birds to determine the start of the wet season, as well as create temporary walls by rivers to store water during droughts. Indigenous knowledge systems should be incorporated into strategic plans for climate change adaptation policies to help smallholder farmers cope with climate change (Mapfumo et al., 2016).

|-
| '''Arctic'''

| For local Inuit hunters and others who travel across Arctic land, ice and sea, there is evidence that the most accurate approach to reduce risk and enable informed decision making for safe travel is to combine Indigenous knowledge and local observations of weather with official online weather and marine services information that is available nationally ( [[#Simonee--2021|Simonee et al., 2021]] ). Combining Inuit and local knowledge of weather, water, ice and climate information with official forecasts has provided local hunters with more accurate, locally relevant information, and has on several occasions helped to avoid major weather-related accidents.

|-
| '''Latin America'''

| In Venezuela, Brazil and Guyana, Indigenous knowledge systems have led to a lower incidence of wildfires, reducing the risk of rising temperatures and droughts ( [[#Mistry--2016|Mistry et al., 2016]] ). The Mapuche Indigenous Peoples in Chile use various traditional and sustainable agricultural practices, including native seed conservation and exchange ( ''trafkintu'' ), crop rotation, polyculture and tree-crop association. They also give thanks to Mother Earth through rituals to nurture socio-ecological sustainability ( [[#Parraguez-Vergara--2018|Parraguez-Vergara et al., 2018]] ). In the rural Cusco Region of Peru, ‘cultures values known in Quechua as ''ayni'' (reciprocity), ''ayllu'' (collectiveness), ''yanantin'' (equilibrium) and ''chanincha'' (solidarity)’ have led to successful adaptation to climate change ( [[#Walshe--2016|Walshe and Argumedo, 2016]] ).

|-
| '''Māori'''

'''(Aotearoa New Zealand)'''

| The traditional calendar system ( ''maramataka'' ) used by the Māori in Aotearoa, New Zealand, incorporates ecological, environmental and celestial Indigenous knowledge. Māori practitioners are collaborating with scientists through the Effect of Climate Change on Traditional Māori Calendars project (Harris et al., 2017) to examine if climatic changes are impacting the use of the ''maramataka'' , which can be used as a framework to identify and explain environmental changes. Observations are being documented across Aotearoa, New Zealand to improve understandings of environmental changes and explore the use of Indigenous Māori knowledge in climate change assessment and adaptation.

|-
| '''Skolt Sámi (Finland)'''

| In 2011, the Skolt Sámi in Finland began the first co-governance initiative where collaborative management and Indigenous knowledge were utilised to effectively manage a river and Atlantic Salmon ( ''Salmo salar'' ). This species is culturally and spiritually significant to the Skolt Sámi and has been adversely impacted by rising water temperatures and habitat loss ( [[#Brattland--2018|Brattland and]] [[#Mustonen--2018|Mustonen, 2018]] ; [[#Feodoroff--2020|Feodoroff, 2020]] ; [[#Ogar--2020|Ogar et al., 2020]] ) (see also CCP Polar). Using Indigenous knowledge, they mapped changes in catchment areas and used cultural indicators to determine the severity of changes. Through collaborative management efforts that utilised both Indigenous knowledge and science, spawning and juvenile habitat areas for trout and grayling were restored, demonstrating the autonomous community capacity ( [[#Huntington--2017|Huntington et al., 2017]] ) of the Indigenous Skolt Sámi and the capacity of Indigenous knowledge to address climate change impacts and detection of very first microplastics pollution together with science ( [[#Pecl--2017|Pecl et al., 2017]] ; [[#Brattland--2018|Brattland and]] [[#Mustonen--2018|Mustonen, 2018]] ; Mustonen and [[#Feodoroff--2020|Feodoroff, 2020]] ).

|}

Cross-Chapter Box INDIG

<div id="box-18.7" class="h2-container box-container"></div>

'''Box 18.7 | Macroeconomic Policies in Support of Climate Resilient Development'''
<div id="h2-30-siblings" class="h2-siblings"></div>

Climate change risk may differ from other economic and financial risks in a number of ways: climate change is global; it involves long-term impacts and a great deal of uncertainty; and it has the possibility of irreversible change ( [[#Hansen--2021|Hansen, 2021]] ). The macroeconomic implications will differ across countries, with less developed countries likely to suffer more relative to more advanced ones ( [[#Batten--2018|Batten, 2018]] ). Hence, policymakers need to understand the impact of climate change on macroeconomic issues such as potential output growth, capital formation, productivity and long-run levels of interest rates, in order to better design policy interventions, be it monetary or fiscal ( [[#Economides--2018|Economides and Xepapadeas, 2018]] ; [[#Bank%20of%20England--2019|Bank of England, 2019]] ; [[#Rudebusch--2019|Rudebusch, 2019]] ). As discussed, below are a range of fiscal tools that can be leveraged to mitigate the effects of climate change ( [[#Krogstrup--2019|Krogstrup and Oman, 2019]] ).

'''Monetary Policy'''
Changes in climate and subsequent policy responses could increase volatility of food and energy prices, resulting in higher headline inflation rates. Thus, Central Banks (CBs) have to pay careful attention to underlying inflationary factors to maintain their inflationary targets. In response, CBs can take a number of actions. For example, they could require that collateral comprises assets that support the move to low-carbon economy, or their refinancing operations and crisis facilities could incentivise borrowers’ move to low-carbon activities, particularly in countries where CBs’ mandate has been expanded to account for climate impact ( [[#Papoutsi--2021|Papoutsi et al., 2021]] ). Other actions that CBs could take include adoption of sustainable and responsible investment principles ( [[#Rudebusch--2019|Rudebusch, 2019]] ) and requiring financial firms to disclose their climate-related risks ( [[#ECB--2020|ECB, 2020]] ; [[#Lee--2020|Lee, 2020]] ). Despite these opportunities, there is ongoing debate regarding whether CBs should actively use monetary policy to address climate change and its risks ( [[#Honohan--2019|Honohan, 2019]] ).

'''Fiscal Policy'''
The application of green fiscal policies to address climate change could lead to environmental benefits, including environmental revenues that may be used for broader fiscal reforms ( [[#OECD--2021|OECD, 2021]] ). As the USA aims at becoming carbon neutral by 2050, fiscal policies at the national, sectoral and international level can help to achieve this goal, along with investment, regulatory and technology policies ( [[#Parry--2021|Parry, 2021]] ). The effectiveness of green fiscal policies are through their fiscal potential, opportunities for efficiency gains, distributional and macroeconomic impacts, and their political economy implications ( [[#Metcalf--2016|Metcalf, 2016]] ). The International Monetary Fund argues public support for green policies may rise in response to the COVID-19 crisis ( [[#IMF--2017|IMF, 2017]] ). For example, [[#Leibenluft--2020|Leibenluft (2020)]] argues that investments to combat climate change should be an important component of the efforts to rebuild the economy in the wake of COVID-19. Such action is justified not only on ecological and social welfare grounds, but from a long-term fiscal perspective. For example, climate change impacts and/or efforts to adapt to those impacts drive increased spending in areas such as public health and disaster mitigation or response. Preventive and corrective actions would strengthen resilience to shocks and alleviate the financial constraints they create, particularly for small countries ( [[#Catalano--2020|Catalano et al., 2020]] ). For example, Mallucci (2020) found that natural disasters exacerbate fiscal vulnerabilities and trigger sovereign defaults in seven Caribbean countries. [[#Ryota--2019|Ryota (2019)]] illustrates how to include natural disaster and climate change in a fiscal policy framework to developing countries.

'''Carbon Pricing'''
Pricing of GHGs, including carbon, is a crucial tool in any cost-effective climate change mitigation strategy, as it provides a mechanism for linking climate action to economic development (IMF/ [[#OECD--2021|OECD, 2021]] ). By 2019, 57 nations around the world had implemented or scheduled implementation of carbon pricing. These initiatives cover 11 gigatons of carbon dioxide or about 20% of GHG emissions. Carbon prices in existing initiatives range between USD 1 and USD 127 per ton of carbon dioxide, while 51% of the emissions that are covered are priced more than USD 10 per ton of carbon dioxide. Moreover, in 2018, Governments raised about USD 44 billion in carbon pricing revenues (World Bank, 2019). However, the carbon prices are lower than the levels required for attaining the ambitious goal of climate change mitigation, and therefore, prices would need to increase if pricing alone is going to be used to drive compliance with the Paris Agreement. Higher carbon prices would also be warranted if prices are based on the social cost of carbon, which represents the present value of the marginal damage to economic output caused by carbon emissions ( [[#Cai--2018|Cai and Lontzek, 2018]] ). This cost needs to be considered with the social benefits of reducing carbon emissions through cost-benefit analyses to make the intended regulation acceptable.

'''Taxes'''
Carbon taxes represent another financial mechanism for addressing climate change ( [[#Metcalf--2019|Metcalf, 2019]] ), 2019b). For example, the implementation of a carbon tax and a value-added tax on transport fuel in Sweden resulted in a reduction of CO 2 emissions from transport of about 11%, of which the carbon tax had the largest share ( [[#Andersson--2019|Andersson, 2019]] ). In the USA, for example, a carbon tax could increase fiscal flexibility by collecting new revenues that can be redeployed to finance reforms and help stimulate economic growth. However, US tax-inclusive energy prices would have to be 273% higher than laissez-faire levels in 2055 in order to meet international agreements ( [[#Casey--2019|Casey, 2019]] ). Similarly, limiting global warming to 2°C or less would likely require a carbon tax rate in the Asia/Pacific region to be significantly higher than USD 25 per ton ( [[#IMF--2021|IMF, 2021]] ). Therefore, using tax revenues to issue payments back to taxpayers that are disproportionately impacted, or to redistribute capital among regions, may be one of the most important features of carbon tax policies. Although the average effect of carbon tax on welfare would be positive, some regions (56%) will gain and some regions (44%) lose ( [[#Scobie--2013|Scobie, 2013]] ). Therefore, large transfer payments are needed to compensate those losing from carbon tax ( [[#Krusell--2018|Krusell and Smith, 2018]] ).The International Monetary Fund ( [[#IMF--2019|IMF (2019)]] argues that, of the various mitigation strategies to reduce fossil fuel CO 2 emissions, carbon taxes are the most powerful and efficient, because they allow firms and households to find the lowest-cost ways of reducing energy use and shifting towards cleaner alternatives.

'''Subsidies'''
The World Bank has been encouraging both developed and developing states, especially those with petroleum reserves, to use the removal of subsidies as a mechanism for promoting energy transitions away from fossil fuels. The transition has led to social unrest in some cases, especially where there is a culture of entitlement to low-cost energy because it is an indigenous resource. Such reforms have been more effective when governments have been able to clearly show how savings are applied to social and health programs that benefit human well-being. Nevertheless, policymakers should not underestimate the complexity of issues involved in the removal of subsidies that will increase the cost of carbon and hasten the transition to cleaner fuels ( [[#Scobie--2017|Scobie, 2017]] ; [[#Scobie--2018|Scobie et al., 2018]] ; [[#Chen--2020a|Chen et al., 2020a]] ). A crucial issue to take into account is the harmful effects some subsidies have on biodiversity. Although governments agreed in 2010 to make progress on reducing subsidies in 2010, by 2020 few governments had identified specific incentives to remove or taken action towards their removal. Further investigation of the positive and negative effects of subsidy redirection or elimination on people and the environment ( [[#Dempsey--2020|Dempsey et al., 2020]] ).

<div id="18.4.4" class="h2-container"></div>

<span id="frontiers-of-climate-action"></span>