This chapter argues that by approaching climate change mitigation through a well-being lens, Israel can not only reduce its emissions, avoid locking in carbon-intensive technologies, but also improve the well-being of its citizens, both, now and in the future. A well-being lens can also help build the social and political support amongst stakeholders to accelerate action on climate. The chapter also brings a summary of the main findings and recommendations that result from following this approach in Israel’s electricity, residential and transport sectors.
Accelerating Climate Action in Israel
Refocusing Mitigation Policies for the Electricity, Residential and Transport Sectors
1. Introduction
Abstract
1.1. How to accelerate climate action in Israel
Urgent, accelerated and concerted action is needed to limit global warming to well-below 2°C, let alone 1.5°C (IPCC, 2018[1]). At whatever temperature target, anthropogenic net emissions of (long-lived) carbon dioxide to the atmosphere must fall to zero or below globally. This means that while major emitters have to accelerate their actions to reduce greenhouse gas (GHG) emissions, even smaller countries contributing only a fraction of global emissions like Israel, also need to move to pathways consistent with net-zero carbon dioxide emissions by around the middle of this century or shortly thereafter. Limiting climate change necessitates a systemic transformational change across sectors (IPCC, 2018[1]). Nevertheless, the evolution of this change – and the policies used to catalyse decarbonisation – will have to be adjusted to national circumstances, priorities and challenges (OECD, 2019[2]).
Collective failure to achieve a balance in GHG emissions from sources and removal by sinks in the second half of this century will have severe consequences. The recent Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5°C warns that climate-related risks to health, livelihoods, food security, water supply, human security and the economy will all increase with the extent of climatic change. Israel along with other Mediterranean countries is expected to suffer major impacts. In particular, increasing severity as well as frequency of extreme heat, droughts and wildfires (OECD, 2019[2]; Ministry of Environmental Protection, 2018[3]), increasing pressure on ecosystems, health, food production, as well as exacerbating the already existing problem of water scarcity in the country (Cramer et al., 2018[4]). Even in a moderate climate change scenario (Representative Concentration Pathway 4.5), winter temperatures could increase by 1.5°C to 3°C while summer temperatures by 1.5°C to 4°C by 2100 relative to 1986-2005 (Ministry of Environmental Protection, 2018[3]).1 Israel is well-placed to use its advanced technological expertise, for example in the water sector, to help it and other countries to adapt. However, still poorly understood future climate extremes and potential tipping points in the climate system mean that effective adaptation action and societal resilience requires strong mitigation action globally to limit climate risks.
Israel’s GHG emissions have been rising in recent years. In 2015, GHG emissions increased by 40% above their level in 2000, reaching 80.18 MtCO2e or 9.38 tCO2e per capita (Ministry of Environmental Protection, 2018[3]). This places Israel’s per capita emissions in the midrange of those of OECD countries, lower than countries like Australia (22 tCO2e per capita) and the US (20 tCO2e per capita), but higher than countries with comparable climate conditions, including Greece (8.6 tCO2e per capita), Italy (7.1 tCO2e per capita) and Spain (7 tCO2e per capita) (OECD, 2018[5]). If Israel continues down its present path, emissions would rise to nearly 99.1 MtCO2e by 2030 or 9.3 tCO2e per capita (Ministry of Environmental Protection, 2018[3]). Energy and transport would be the biggest contributors, accounting for 53% and 21% of these emissions, respectively (Ministry of Environmental Protection, 2018[3]).
Israel is starting to change its course towards a lower carbon trajectory but only to a modest extent. In September 2015, Israel set a target of reducing GHG emissions to 7.7 tCO2e per capita by 2030 in Decision 542, also contained in its Nationally Determined Contribution (NDC) submitted to the UNFCCC (Ministry of Environmental Protection, 2018[3]). The only other countries to have set per capita emission targets include Malawi, Albania, Armenia and Zimbabwe; the bulk of OECD countries set absolute emission reduction targets for 2030, typically, compared to 1990 or 2005 levels of GHG emissions. Under business as usual (BAU) assumptions, Israel’s per capita target translates into an absolute emissions target of 76.3 MtCO2e as projected by the Ministry of Environmental Protection (2015[6]). This is only slightly lower than emissions in 2015 and almost 5% higher than emissions in 2005 (72.4 MtCO2e). This pales in comparison to other OECD countries with similar GDP levels like Norway, which has committed to a 40% reduction in absolute emissions below 1990 levels by 2030, or facing similar climate conditions such as Spain and Portugal that committed to a reduction of 26 % and 17 % respectively, both relative to 2005 levels. Other small countries, albeit with lower population growth rates, are stepping up to the challenge with even greater ambition. For example, Denmark, who is aiming for 70% below 1990 levels by 2030 (UNFCCC, 2019[7]).
In addition to the economy-wide target, Decision 542 also includes specific targets in sectors included in the NDC (regarding energy efficiency, renewable energy and public transport), but the NDC itself does not include sector-specific targets (Ministry of Environmental Protection, 2018[3]). For example, Decision 542 aims to increase the share of renewables in electricity generation to 17% by 2030 and to reduce electricity consumption by at least 17% by 2030 and private car mileage by at least 20%, both relative to BAU. In addition, the Israeli government passed Decision 1403 in April 2016, which set up an advisory team to the Finance Minister, providing grants for energy efficiency.2
Israel is now confronted with the challenge of putting in place the policy packages that will catalyse deep emission reductions and ambitious sector-specific targets. Formulating an effective policy package becomes complex given the realities on the ground. For a range of reasons, Israel is an energy island to a large extent, cut off from sharing electricity with its neighbours. Energy security is paramount and has been reinforced by newly found natural gas reserves. Meanwhile, Israel faces a rapidly growing population (around a 2% increase each year) posing challenges for the availability and affordability of housing. In addition, it suffers high levels of congestion on its roads in comparison with other OECD countries (the societal costs of this are around 2% of GDP,3 according to the Israeli Tax Authority) and an overall limited accessibility to opportunities for its population (in particular through active and public transport modes). The exposure of Israel’s population to air pollution – PM2.5 and PM10 - is one of the highest in OECD countries, causing 2,500 premature deaths per year (OECD, 2019[2]).
Attaining these broader wellbeing goals – whether affordable housing, reliable energy, improved accessibility, good health, life quality in cities, or biodiversity - depends on Israel’s ability to limit climate risks. And the way in which these challenges are tackled will have major implications for Israel’s future GHG emissions and its resilience to increasingly severe and frequent climate impacts. While climate change is just one of Israel’s priorities, it must be fully integrated into these other agendas. These different objectives cannot be pursued separately, either financially or substantively (OECD, 2019[2]).
Climate actions will also be easier to implement politically, economically and socially – and more cost-effective – when there is two-way alignment between climate action and broader societal priorities (OECD, 2019[2]). Non-climate policies and action should support rather than undermine the pursuit of climate change mitigation goals (OECD, 2015[8]). Likewise, climate change mitigation should also meet other important societal goals, or in the least, identify and manage any trade-offs with such goals, in order to enhance the attractiveness and feasibility of such actions. Applying a well-being lens to these simultaneous challenges helps identify policy options that better capture the synergies between mitigation and other priorities (OECD, 2019[2]).4 It can also help manage trade-offs, opening up the potential for more coherent policy packages that can yield significant benefits across different goals and sectors. A full definition of well-being is given in Box 1.1 below.
Moreover, the well-being benefits that can be achieved from well-designed GHG emissions reduction policies will accrue far earlier than the benefits from the reduction of climate risks. Improvements in well-being, as a by-product of mitigation, could therefore help counter the short-termism pervasive in decision-making at all levels, from individuals to governments (OECD, 2019[2]). For example, switching from coal to gas in Israel’s electricity generation not only reduces electricity-related GHG emissions,5 but also reduces emissions of nitrous oxides (NOx) and sulphur oxides (SOx)6 that have damaging health effects (OECD, 2019[9]). This change brought important short-term health benefits - reductions in cardiovascular events and lower mortality in major cities (Ministry of Health, 2017[10]).
Conversely, any potentially negative well-being impacts are likely to inhibit, or even roll back, action on climate change mitigation. These potential negative impacts therefore need to be identified in advance of policy action, carefully analysed and managed in a targeted and cost-effective way. While some negative impacts may be unavoidable (e.g. some regressive impacts of pricing changes), they can be managed through complementary policies such as income transfers or energy efficiency improvements targeted at energy-poor households that can help vulnerable households cope with desired policy changes.
The objective of this report is to support the Ministry of Environmental Protection in Israel to identify climate actions that will be necessary in the near-term to reduce GHG emissions in three sectors – electricity, residential and transport, serving as input to whole of government discussions for the development of the roadmap to support Israel’s Long-term Low Emissions Development Strategy (LT-LEDS). The report analyses the opportunities and challenges in each of these sectors and makes recommendations for how mitigation interventions can be better designed to integrate both climate and broader well-being objectives, i.e. to achieve greater two-way alignment. Wherever possible, the benefits and costs of these actions are quantified. While it was written before the current COVID-19 crisis, the report can also inform decisions about Israel’s recovery from the crisis; ensuring that these foster transformation in the three sectors rather than lock them into “inferior” carbon-intensive paradigms that also entrench inequalities and reduce the quality of life more broadly.
Box 1.1. OECD and Israeli Well-being Frameworks
In broad terms, a state of well-being “requires meeting various human needs, some of which are essential (e.g. being in good health), as well as the ability to pursue one’s goals, to thrive and feel satisfied with [one’s] life” (OECD, 2011[11]). Throughout this report, the term “well-being” refers to present and future well-being.
The OECD Well-being Framework and the closely-related Israeli Framework on Well-being, Resilience, and Sustainability are analytical tools to examine well-being beyond its purely economic aspects. The OECD framework enables the analysis of the distribution of well-being across the population by analysing both current and future well-being, an important feature for climate change mitigation policies. Current well-being – in the OECD Framework- is broken into two domains, (1) material conditions and (2) quality of life. Each of these is disaggregated further into: income and wealth, jobs and earnings, housing conditions, health status, work and life balance, education and skills, social connections, civic engagement and governance, environmental quality, personal security and subjective well-being. These dimensions coincide with the Israeli Well-being Framework, with one addition in the Israeli framework of Information Technology (2016[12]). Future well-being in the OECD Framework captures the availability of the natural, economic, human and social capital stocks necessary to maintain well-being for future generations. This aspect was excluded from the Israeli framework, but is a critical element of well-being and sustainability.
Figure 1.1. OECD Well-being Framework
Source: (OECD, 2011[11])
OECD (2016[12]) finds that Israel is a top performer in comparison with other OECD countries, with respect to educational attainment, life satisfaction and health status in each of the two frameworks. However, it is one of the worst performing countries in terms of income poverty, housing and air pollution, when compared with other OECD countries (OECD, 2016[12]). Mitigation is an opportunity for Israel to improve its performance on these poorer performing dimensions as well as to ensure that it takes adequate account of the conditions under which future well-being can be better assured.
1.2. Aligning short-term actions with a low-carbon trajectory
The Ministry of Environmental Protection is in the process of developing Israel’s LT-LEDS, as invited by the Paris Agreement (UNFCCC, 2015[13]). So far, 17 countries have submitted LT-LEDS to the UNFCCC. While there is no definition of what a LT-LEDS should be in the Paris Agreement, it typically envisions pathways for low emissions economic development taking into the account national, institutional, economic, technological and social circumstances (Aguilar Jaber et al., 2020[14]).One key recommendation, informed by an earlier OECD analysis of LT-LEDS in three major economies (Aguilar Jaber et al., 2020[14]), is the critical importance of broad political and societal commitment for these challenging, transformative pathways. One element of this commitment could be to enshrine the vision and targets of its LT-LEDS in national legislation to provide confidence to and set the expectations of different societal and economic actors about the long-term direction of change. This is the first recommendation of this report: that Israel should give appropriate legislative effect to the vision and goals of its LT-LEDS, once these have been developed and agreed.
As Israel articulates a long-term vision until mid- century, simultaneous consideration also needs to be given to the near-term actions required to move the country towards this longer-term goal. Particular attention needs to be given to choices that might lock-in unsustainable development pathways that would impede the achievement of net-zero carbon dioxide emissions in the second half of the century. The objective of this report is to analyse what these near-term actions should be in the electricity (Chapter 2), residential (Chapter 3) and transport sectors (Chapter 4). The report also includes an Annex, which is focuses on how to align finance with the low-carbon transition.
As illustrated in the recent report, Accelerating Climate Action: Refocusing policies through a well-being lens, starting points matter (OECD, 2019[15]). Each sector is starting with existing infrastructure, policy and investment frameworks, political economy barriers and opportunities, in addition to the future challenges from climatic changes. This report analyses the starting points in each of these sectors to determine what near-term actions are feasible – indeed essential – to ensure a sustainable development pathway towards mid-century that avoids locking-in emissions-intensive infrastructure. The analysis also points to cross-sectoral actions to facilitate this, such as placing greater responsibility in the hands of municipalities. The rest of this section provides a brief overview of each of the chapters.
1.2.1. Electricity: Prioritise solar over natural gas (Chapter 2)
Electricity is the largest source of GHG emissions in Israel, accounting for almost 50% of emissions in 2016. A by-product of electricity generation with fossil fuels is air pollution, which takes its toll on public health reducing current well-being; it produced 85% and 58% of Israel’s SOx and NOx emissions, respectively, in 2016 (OECD, 2018[16]). Over the last decade, natural gas has steadily replaced coal in electricity generation, rising from a share of 39% in 2010 to 66% in 2018, driven chiefly by the discovery of off-shore natural gas reserves. This discovery offers enhanced energy security, but still contributes to GHG emissions and other forms of pollution, albeit at a lower level than coal. A rising population and the electrification of end-use sectors means the increasing future electricity demand. This in turn will only lead to increasing emissions and pollution if unabated natural gas generation continues to dominate the generation mix. Despite a vast potential for solar generation, a key impediment is land availability close to demand centres.
Chapter 2 starts from these long-term trends and existing policy frameworks, charting a path forward for the electricity sector in Israel. It argues that predominantly relying on natural gas in the longer-term jeopardises deep decarbonisation and calls for urgent action to scale up solar generation. Accelerating the pace of renewables deployment would also enhance public health, spur economic development in rural areas (e.g. the Negev desert) and create high-tech jobs as well as export opportunities related to smart-grid technologies, all of which improve current and future well-being. Natural gas reserves could be used predominantly for industrial sectors where emissions are hard to abate or exported to countries with less abundant renewable resources. Revenues from royalties could feed a sovereign wealth fund that should adopt strong sustainability criteria for its investments.
Chapter 2 outlines how to accelerate the deployment of renewables, for example, by aligning energy taxes with the social costs of electricity generation, so that more polluting plants face higher costs than less polluting plants. Highlighting the role of continuing support for renewables, the chapter also emphasises the priority of exploiting the potential of distributed generation (DG), which would deliver electricity close to demand centres while increasing the resilience of the power system. As solar PV generation is variable, the chapter also outlines key strategies to improve the flexibility of the power system (e.g. by incentivising participation in demand response and investments in storage), facilitating the integration of higher levels of renewables. In the very short-term, improving the energy efficiency of end-use sectors can deliver emission reductions, but this will be insufficient to bring about the deep emission reductions needed and the effects may be offset by rebound effects.7
1.2.2. Residential: Creating affordable and sustainable homes (Chapter 3)
Rapid population growth (2% p.a.) and associated housing needs are a major and urgent challenge. So too are the climate implications of how this challenge is tackled. The housing shortage is driving increases in housing costs throughout Israel impacting Israelis’ well-being. The government plans for a total of 1.5 million new dwellings to be built by 2040. Emissions from energy use in the residential sector, which plateaued over the last decade, could consequently increase dramatically. If Israel does not take this near-term opportunity to integrate better its housing and climate mitigation goals, it runs the risk of creating an emission-intensive building stock that will lock-in GHG emissions for the decades to come.
Chapter 3 dives into the links between the spatial scales of housing – dwelling, neighbourhood and city level - with mitigation. At the dwelling-level, the chapter outlines the rationale for retrofitting existing dwellings and how to establish and enforce best practices in the construction of new homes. It then reviews supply-side instruments as means to reduce emissions from housing, e.g. emission limits on buildings, as well as demand-side measures such as green public procurement. In addition, the chapter estimates the total financing needed to retrofit the existing building stock. High upfront costs and long payback periods make retrofits fairly unattractive for property owners. The chapter therefore proposes alternative financial instruments for Israel to consider that could alleviate these problems.
Beyond the dwelling level, rapid housing developments can lead to sprawl and low-density cities if badly managed; Israel will need to guide this growth. On the one hand minimum densities and policies that can incentivise the development of vacant land, in addition to the use of land value capture mechanisms can help to re-develop and densify the urban cores. However, anticipating and planning for the inevitable growth that will occur in less– or non- urbanized zones due to projected population growth will also be paramount for ensuring urban areas expand in a sustainable way. Overall, with greater densities comes the need for infrastructure that can sustain it, including transport infrastructure but also the green infrastructure needed to avoid urban heat islands, which could inadvertently increase emissions from higher electricity demand when cooling homes. The chapter also explores how Israel needs to integrate infrastructure with newly built dwellings such as green areas, transport, energy and water.
As cities become more compact and attractive, ensuring that low-income people still have access to affordable housing will be key. Local governments can better adapt approaches to local circumstances than central government ministries. Providing municipalities with greater autonomy could be an opportunity for Israel to manage these coming decades of growing cities in a more responsive and locally-appropriate way that fosters well-being and climate goals. Israel could build on international experience by embedding this process in a framework that allows for metropolitan bodies, which can help integrate and coordinate actions of different municipalities (in many cases urban and rural) that are part of the same economic unit. The chapter ends with options for financing sustainable development, such as urban renewal and eco-districts.
1.2.3. Transport: Enhancing accessibility by prioritising public and active transport (Chapter 4)
Transport is the second largest contributor to emissions after electricity (23% of Israel’s emissions); emissions rose by 24% from 2006 to 2016. Car dependency is high in Israel, because of the limited public transport available and the mismatch between low active and public transport infrastructure investment and a rapidly expanding residential sector. The by-product of this is not only emissions, but also air pollution, congestion and severe accessibility gaps, all of which worsens Israelis’ well-being now and in the future.
Chapter 4 analyses ways forward to transform the transport system in Israel in order to bring mitigation and wider well-being benefits. It finds that taxation of private car use needs to be better aligned with environmental damage and external costs (air pollution, congestion, noise, road wear). Allowing for a regular update of the car purchase tax in the short term will allow to maintain its environmental benefits and limit erosion of the tax base. A further step would be to replace the fuel tax by a tax proportional to the distance driven, varying with a vehicle’s characteristics. This could enhance economic efficiency, appears technically feasible and would also automatically deliver the benefits of a more limited measure like a congestion charge (which could still be a good option in the short term). The chapter also brings attention to the need to manage road space (both through re-allocation and pricing) under the principle of prioritising public and active transport modes, and with the aim to improve safety and accessibility. It puts forward a number of tools to do so.
This chapter highlights the overall need to adopt accessibility-based planning and investment frameworks, and sets out ways in which these can be developed. This can help Israel seize the significant opportunity to create or reshape neighbourhoods and cities in ways that improve the population’s access to services and opportunities through more sustainable modes.8 The chapter then discusses how to ensure transport budgets are sustainable. Improving methodologies to set public transport fares and enlarging funding sources for transport (e.g. by using land-value capture) to go beyond fare box revenues and transfers from the central government will be essential to covering expansion, upgrade and regulatory costs, as well operation and maintenance.
The chapter closes with a discussion of the governance of the transport sector. It highlights the important role that Metropolitan Transport Authorities (MTAs) could play in improving mobility systems in cities in Israel. This type of institutional arrangement has proven successful in numerous cities around the world in delivering sustainable long-term improvements in accessibility and quality of life. Their development in Israel would facilitate a process of decentralising transport responsibilities while ensuring continued coordination and coherence in decisions across entities that are part of a same economic unit. It would also help to develop planning and regulatory capacity inside the public sector, which is an important limitation of the current model.9 At the same time, the central government will need to develop a national policy for metropolitan and urban transport to guide local policy decisions and investments, to standardise local planning tools to make sure they follow good practice and bridge technical capacity gaps across territories.
1.2.4. Aligning finance with the low-carbon transition (Annex)
The Annex at the end of this report contains suggestions on how to align finance with the transition towards a sustainable economy. It notes the chronic underinvestment of Israel in infrastructure over the last decade compared to other OECD countries in infrastructure in terms of roads, homes, schools, and so on. It highlights that aligning financial flows with the low-carbon transition will need to make strategic use of public finance to mobilise private investment. It also points out the need for project pipelines to specify needed low-carbon infrastructure projects, so that private investors know where to invest funds. Likewise, Israel could try to classify whether different economic activities are green, such as being undertaken by the European Union’s Sustainable Finance Taxonomy, or classify whether financial instruments aide, rather than impede the transition, such as the Climate Bonds Initiatives. Finally, it reviews how institutional actors like the Central Bank can mobilise and direct finance towards sustainable activities.
References
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Notes
← 1. Prior experience with heat waves of 1°C above average in the summer increased mortality in Tel Aviv by 3.7% and increased emergency hospital visits by 1.47% (Ministry of Environmental Protection, 2018[3]).
← 2. http://www.sviva.gov.il/English/env_topics/climatechange/NatlEmissionsReductionPlan/Documents/Govt-Decision-1403-National-GHG-Reduction-Plan-April-2016.pdf
← 3. Including the extra gasoline lost in traffic jams and the value of time lost due to congestion.
← 4. The concept of well-being goes beyond economic welfare: it incorporates such aspects as political and social rights, health, education, security and environmental quality (OECD, 2011[11]).
← 5. From 42.3 Mt CO2e in 2010 to 40.2 Mt CO2e in 2016.
← 6. By 38% and 33%, respectively between 2010 and 2016.
← 7. See for example, (Sorrell, Dimitropoulos and Sommerville, 2009[17]).
← 8. For example, public transport, cycling and walking.
← 9. This is particularly needed in the context of fast evolving transport services and the need to adopt a Mobility as a Service (MaaS) approach.