Key insights
- Between 2010 and 2021, climate action increased by 10% on average annually across OECD and OECD partner countries. However, in 2022 and 2023, growth in climate action decreased to 1% per year.
- In 2023, non-market-based instruments (nMBIs) and market-based instruments (MBIs) represented 39% and 36% respectively of national climate policy mixes. The remaining 25% consisted of ‘Targets, governance and climate data’.
- Since 2010, the use of nMBIs expanded by 111%, outpacing MBIs, which grew by only 33%.
- While the use of nMBIs varies significantly across countries, they are more prominent in China, India and many Latin American countries than in the EU-27, Canada and New Zealand.
- “Information instruments and performance standards” are the most common nMBIs, especially in the buildings and industry sectors.
Why it matters?
Achieving the Paris Agreement’s temperature goals requires effective, sustained climate action. Yet, recent years show a marked slowdown in climate policy progress (Figure 1). Tracking both the adoption and stringency of climate action [1], and exploring alternative policy approaches help countries benchmark their progress and identify gaps.
NMBIs are central to many countries’ policy mix to fight climate change. These promote low-carbon choices without direct price signals through regulations, non-monetary incentives, enhanced information, or enabling policies (e.g. public transport infrastructure). Since 2021, climate action based on nMBIs has outpaced that of MBIs (Figure 1).
Table 1 presents the class and definition of the most common nMBIs.
Major trends and state of play
Countries' reliance on nMBIs reflects differences in emissions profile, perceived effectiveness, institutional capacity and political priorities (Figure 2). For instance, EU-27, Canada and New Zealand place relatively less emphasis on nMBIs. This does not mean that nMBIs are not important in these countries. Rather, it shows that these countries rely more on other climate actions such as carbon pricing and subsidies. Latin American countries, China and India put more emphasis on nMBIs in their policy mixes.
NMBIs have expanded most in the electricity and industry sectors (Figure 3), driven by the adoption and strengthening of minimum energy performance standards (MEPS) for electrical motors and the increasing national commitments to ban and phase out coal power plants. For example, the EU-27 adopted MEPS for electric motors in 2011 and further strengthened the standard in 2015 and 2023. In contrast, slower progress was observed in the buildings, transport and cross-sectoral actions (e.g. bans and phase-outs of fossil fuel extraction).
Types and use of nMBIs
Performance standards remain the most common nMBIs, making up nearly 50% of nMBIs in 2023 (down from 60% in 2010), while technology standards are growing fastest (Figure 4).
The stringency of nMBIs also differs substantially across countries and instruments (Figure 5). G7 and OECD countries generally lead in both adoption and stringency, especially for performance and technology standards.
Information instruments (mostly labels) have high adoption rates globally.
Performance standards such as MEPS for lighting and appliances are widespread, whereas others (e.g. fuel economy standards for heavy-duty vehicles) remain limited (Figure 6). Most MEPS standards were adopted post-2010, with stringency levels rising at different paces (Figure 7).
Canada was an early adopter of MEPS in 1997, the EU and Japan quickly ramped them up while China and Brazil chose a more gradual approach. India only adopted MEPS for electric motors in 2018, and some other G20 countries still lack such policies.
Technology standards, such as coal power plant bans and phase-outs are the most prevalent type (Figure 8). Bans and phase-outs send a clear policy signal and provide certainty for investors, firms and households to switch to low-carbon alternatives. Since 2017, they have gained traction through initiatives like the Powering Past Coal Alliance (PPCA). Additional measures now target fossil fuel assets such as heating systems in buildings or passenger cars with internal combustion engines. Yet, fossil fuel exploration and extraction phase-outs remain limited, despite momentum from initiatives like the Beyond Oil and Gas Alliance (BOGA) launched at COP26 in 2021.
NOTES:
[1] Climate action is measured by the CAPMF as a combination of policy adoption and policy stringency. The CAPMF quantifies policy stringency and climate action within a range from 0 (no climate action) and 10 (strong action), which allows comparison of different policy types over time and space.
