How Politics Shapes Climate Policy: Insights for Risk Professionals

Hear from Prof. David Victor and Dr. Danny Cullenward, as we dive into the political forces that mould the climate policy landscape.

Designing climate policies that are effective in achieving climate change mitigation and adaptation is a major challenge.

Most economists argue for a carbon tax, which helps align incentives appropriately. But the costs can be all too visible to consumers, prompting protests and undermining their political acceptability.  Indeed, when it comes to climate policy, you will often find that there is a trade-off between what is effective, and what is realistic.

Today’s discussion is all about how politics shapes the plausibility and effectiveness of different climate policies. We discuss how the interests of consumers, firms, and political parties play a major role in determining not only what climate policies work best, but which ones are even possible.

In this episode, we explore:

• Why policies with highly visible costs tend to be avoided by politicians;
• How politically organized groups can resist the implementation of market-based policies;
• And the surprizing difference in mitigatory power between market-based and regulatory policies.

Links from today’s discussion:

• David and Danny’s 2020 book, Making Climate Policy Work
• The historical, political, and economic phenomenon of Potemkin villages
• Severin Borenstein et al.’s research paper on the relative mitigatory efficacies of market-based and non-market-based climate policies
• Martin Weitzman’s research paper on price-based vs. quantity-based policies in the context of emissions uncertainty