Author:Driesen, David M.

    Analysis of the political economy of climate disruption (1) usually relies on the assumption that climate policy must offer advantages to the special interests that oppose it in order to sufficiently mollify those interests and the politicians that serve them to make headway. (2) Call this the political economy of compromise. The political economy of compromise has been at the center of U.S. and global climate policy. (3) It helps explain governments' heavy reliance on emissions trading based on grandfathering, which offers cost savings to polluters and a market-based approach to politicians skeptical of government solutions to problems. (4) And academic writing focuses overwhelmingly on this model's implications. (5)

    Yet, many of the most successful climate policies around the world are not climate policies based on the political economy of compromise. Indeed, they are not climate policies at all, at least in the sense of being created only to achieve greenhouse gas abatement. The most successful policies that achieve greenhouse gas abatement serve many interests besides those of environmentalists concerned only about climate disruption and sometimes achieve vast reductions in greenhouse gas emissions inadvertently. Examples include the French nuclear program, (6) the German feed-in tariff, (7) the Brazilian biofuels program, (8) the British dash to gas, (9) and the global phase-out of ozone depleting chemicals. (10) These programs offer examples of major departures from the status quo that have greatly reduced greenhouse gas emissions and often moved countries far down the path toward phasing out fossil fuels in a significant economic sector. Collectively, they delivered far more greenhouse gas emission reductions than the Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol). (11) Yet, none of them came into being in order to address climate disruption.

    These policies point toward a different conception of climate's political economy: the idea that one can get support for ambitious climate policies by serving varied interests, including non-climate interests. In other words, there are two ways of solving the political economy problem that special interest opposition presents. One involves mollifying the special interests. The second involves offering benefits to other constituencies besides a single-issue environmental constituency. Call this the political economy of multiple benefits.

    For the federal government of the United States at least, the political economy of compromise may have exhausted its potential. This Article explains why this may be so and explores the potential of policies designed to take advantage of the political economy of multiple benefits to secure enactment. In particular, this Article suggests the possibility of designing policies to take advantage of what one might call a populist political economy, i.e., a type of multiple benefits political economy that offers sufficiently salient benefits to the population at large as to make many of them active supporters of effective climate policy. To concretize this idea of a populist political economy it explores the possibility of a populist carbon tax, which might have the potential to stimulate active support for climate policy from new constituencies, thereby shifting the ideological climate that has slowed and sometimes defeated ambitious federal action on this issue. (12)

    In proposing a multiple benefits model, I do not mean to suggest that the two primary models (compromise and multiple benefits) are necessarily mutually exclusive. Indeed, this Article aims to open up space to think about the tradeoffs between these models and possible combinations.

    This Article also builds on some broader themes. It relies heavily on public choice theory, which sees government as serving special interests. (13) Yet in developing its political economy models this Article takes into account public choice theory's limitations, which the public choice literature itself recognizes. (14) In particular, in developing these models this Article considers ideology's role in forming policy, which has become a particularly important subject for U.S. policy. (15) Thus, while this Article starts with public choice, it does not end there.

    This Article begins with an explanation of the political economy of the compromise model. It reveals that this model relies heavily on an assumption about the pragmatic character of environmental politics and that this assumption may no longer hold true in the United States. Because of this, the compromise model may no longer prove useful as a sole model for designing effective national policies.

    The second Part develops the concept of a multiple benefits political economy using many of the examples already mentioned. It also maps this multiple benefits model's relationship to public choice theory, showing that some benefits may buy support from concentrated interests, which play a starring role in public choice theory, but some may offer advantages to the broader polity.

    The third Part develops the concept of a populist political economy largely through discussion of a populist carbon tax. It develops the concept of populism and describes the role policy proposals may play in making a populist campaign successful. It uses the populist carbon tax example to show how the concept of a populist climate policy changes the questions we ask of a policy proposal. And the carbon tax proposal helps explain how we might answer the questions made relevant by a concept of populist political economy.


    The political economy of compromise is well entrenched in environmental law and economics. The key insight involves recognizing that emissions trading might prove useful in securing polluters' cooperation. If the government gives polluters allowances for free, they receive a valuable asset and they gain cost reductions from trading's flexibility. (16)

    By contrast, if a government auctions off pollution allowances or imposes a pollution tax, polluters have to pay for each ton of pollution emitted. (17) These approaches convert a right to pollute free of charge into a privilege that polluters must pay for. (18) Hence, polluters often oppose auctioning of allowances and pollution taxes, but may support emissions trading based on grandfathering. (19)

    The history of emissions trading seems to prove the model's value. In the run-up to the 1990 Amendments to the Clean Air Act (20) (CAA), environmentalists and government officials secured industry cooperation in crafting an acid rain program by offering the flexibility of emissions trading. (21) This cooperation produced a very successful program that delivered significant environmental benefits at a fraction of the predicted cost, with minimal litigation and strife. (22)

    Buoyed by this success, the United States became an advocate of global environmental benefit trading (23) as an approach to addressing climate disruption. Its support for trading played a key role in making trading a centerpiece of the international climate disruption regime. (24)

    When the European Union began to design an emissions trading scheme as the centerpiece of its climate strategy, (25) U.S. advisors taught the European Commission the valuable political economy lessons it had learned. It might be more efficient to sell allowances, but doing so would ignite special interest opposition. (26) Accordingly, even though the E.U. Commission appreciated the value of auctioning allowances, the first two phases of its scheme relied overwhelming on grandfathering (giving allowances away for free). (27)

    The compromise model relies in part on public choice theory. Public choice theory sees legislation as predominantly an effort to serve special interests, rather than to pursue the public good. (28) Many of the theory's proponents see organized groups seeking to protect the environment as special interests. (29) Hence, this political compromise model basically applies a public choice model to the problem of instrument choice in environmental law.

    Yet, recent events suggest some limits to the political compromise model's ability to predict special interest responses to emissions trading. When the United States Environmental Protection Agency (EPA) developed a rule to regulate greenhouse gas emissions from existing power plants in 2015, it authorized emissions trading as a technique and did not propose to sell any allowances. (30) But the electric power industry did not cooperate. Instead, much of it lobbied vehemently to weaken EPA's Clean Power Plan (as this rule is called) and pursued several lawsuits, including one filed even before EPA finalized its rule. (31)

    Analyzing the theory underlying the prediction that trading will secure polluter cooperation will help us understand this discrepancy in polluters' responses to trading proposals. Public choice theory suggests that regulated polluters will resist efforts to curtail emissions unless those efforts benefit them. Hence, the prediction that polluters will support trading relies on the idea that trading will benefit polluters.

    But how precisely does emissions trading benefit polluters? The idea that emissions trading benefits polluters relies on an assumption that polluters will have to reduce emissions one way or another, but they can influence the choice of mechanisms. This was a realistic assumption at the time of the 1990 CAA amendments. (32) Environmental protection had bipartisan support in Congress, and while polluters could sometimes stall action for a time (and had done so with respect to addressing acid rain for quite a while), environmentalists enjoyed sufficient political...

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