At the Ministerial Council Meeting in May 2014, ministers and representatives of OECD member countries and the European Union invited the OECD to work with the International Energy Agency (IEA), the International Transport Forum (ITF) and the Nuclear Energy Agency (NEA) “to continue to support the UNFCCC negotiations and to examine how to better align policies across different areas for a successful economic transition of all countries to sustainable low-carbon and climate-resilient economies and report to the 2015 OECD Ministerial Council Meeting.” These areas include economic, fiscal, financial, competition, employment, social, environmental, energy, investment, trade, development co-operation, innovation, agriculture and sustainable food production, regional as well as urban, and transport policies.

Addressing human-induced climate change is one of the most significant challenges to be undertaken by the international community. The problem has long been identified but emissions of greenhouse gases keep rising, and the urgency of action increases with every passing year. Protecting the earth’s climate implies a transformational agenda that needs a resolute and enduring commitment. The IPCC Fifth Assessment Report tells us that we need to return global greenhouse gas emissions to a net zero level by the end of the century.

Addressing climate change requires urgent policy action to drive an unprecedented global infrastructure and technological transformation. More countries are implementing core climate policies: carbon pricing and market-based instruments, regulatory intervention and targeted support to innovation in low-carbon sustainable technologies. But global greenhouse gas emissions have risen rapidly and remain too high to avoid severe and irreversible climate change impacts.

This chapter presents the scientific basis for climate action and the transformative nature of climate policy objectives. Action to mitigate climate change must rest on three pillars: an explicit or implicit price on CO2 emissions, regulations to remove barriers to energy efficiency, and targeted support to bring low-carbon technologies to market. The chapter highlights the need for stakeholder (consumers, industry) buy-in of these core climate policies, careful consideration by governments, and alignment of broader policy frameworks, traditionally hard-wired to fossil fuels, towards a low-carbon economy. Identifying and reforming misaligned policies can also help the transition while also supporting other policy objectives.