Andreas Papandreou

Speaker: Andreas Papandreou, Professor of Economics, National and Kapodistrian University of Athens

Title of Lecture: Political Economy Perspectives of Climate Policy

Absract:

This paper considers certain political economy aspects relating to the development of carbon markets and more specifically the EU Emissions Trading System. It touches on the conflicting narratives of their being too little use of economic instruments versus their being too many carbon markets. According to one narrative drawing on public choice theory there has been too slow an uptake of economic instruments and their design has been ineffective. According to a political economy perspective that focuses on the role of neoliberalism, there has been an impressive spread of carbon markets that may undermine real action on climate change. Moving from this broad perspective the paper sheds light on certain public choice aspects of the development of the EU ETS, from the initial decision to abandon a carbon or energy tax to the particular way that it was designed. Despite difficulties in assessing the impact of the EU ETS on emissions or judging it in the broader context of climate policy developments, it suggests that a public choice appraisal is important both to explain potential design flaws but also as a way of better informing climate policy design. It presents a general public choice framework identifying the main economic agents influencing policy and considers their motivations, their likely influence, and the main target of their influence activity.  Despite broad recognition that politics and political economy interactions are central obstacles to progress on the climate policy front it is surprising how little the analysis of policy has been informed by a public choice perspective (or political economy more broadly). This paper is meant in part to highlight this lacuna and motivate further research in this direction.