Political Economy of Climate Change Policy

Abstract

Anthropogenic climate change poses a threat to all people and governments, but the response to that threat varies enormously across countries. Some adopt politically costly and economically challenging climate change mitigation policies, while others deny that climate change is occurring. Why do some countries adopt effective climate change policies while others do not? To answer this fundamental question, this paper analyses the political economy determinants of climate change policy around the world. In order to measure climate change policy, we introduce a new index, the ‘Climate Laws, Institutions and Measures Index’ (CLIMI), the first systematic attempt to measure countries’ policy responses to the risk of climate change. CLIMI covers all the relevant institutions and sector-specific policies in 95 countries, representing 90% of the world’s GHG emissions. We then use CLIMI to examine the political and economic factors that determine countries’ choices to implement policies to tackle climate change. We find that the level of democracy alone is not a major driver of climate change policy adoption, but that public knowledge of climate change is. Not surprisingly, a high concentration of carbon-intensive industry in the economy hinders the adoption of climate change policy. Countries in which the citizenry has a better public awareness of climate change have more effective climate policies regardless of the presence of democratic institutions.

Keywords: climate change, political economy, governance, policy, democracy, media, veto players

JEL Classification: Q54, Q56, Q58