INTEREST-BASED EXPLANATIONS OF THE STRINGENCY OF CARBON-PRICING POLICIES: THREE ANALYTICAL APPROACHES

Putting a price on emissions is one of the most efficient ways to fight climate change. However, in spite of the international community’s efforts, most carbon-pricing policies (CPPs) fall short of the stringency needed to reach the commitments of the Paris Agreement. Given that abating emissions imposes costs on specific actors within a national economy, the policy design and implementation of mitigation policies are still in the realm of domestic decision-making. This dissertation investigates the political economy determinants of the stringency of CPPs. It argues that specific constituencies –the emission-intensive trade exposed sectors and the fossil fuel industry– influence the policymaking process to lower CPP stringency because they would pay the cost of commodifying emissions.

Chapter 1 uses a non-traditional instrumental variable and finds negative and statistically significant associations between industrial output size and the CPP stringency in 34 countries from 1990 to 2015. Chapter 2 develops an argument that follows from the findings in chapter 1, using process-tracing to assess the “who and how” of stakeholder influence in three Mexican policies, the carbon tax, the Law for Energy Transition and the pilot cap-and-trade. Chapter 3 uses a qualitative comparative analysis to analyze subnational CPPs in North America. It includes 45 cases in which states and provinces in Canada, Mexico, and the United States, have sought to implement these policies.

Overall, the chapters find that regardless of the levels of economic development, ideological orientation, institutional design, and other conventional wisdom variables, interest-based considerations influence CPP stringency the most. The dissertation uses three different methods –deductive statistical inferences, process-tracing, and qualitative comparative analysis– to demonstrate how calculations of costs and benefits shape the current landscape of national and subnational CPPs. The work closes with policy recommendations that acknowledge that policymakers must consider political economy forces and engage with powerful stakeholders in the design of these policies.