Who puts a price on carbon, why and how? A global empirical analysis of carbon pricing policies

This article examines why some countries put a price on greenhouse gas emissions while others do not; and why some carbon pricing policies are more ambitious than others. Our study of a global sample of 200 countries by means of event history analysis reveals that governments are more likely to opt for carbon pricing policies when their trading partners, as well as competitor countries that export goods to the same market, also do so. This pattern is similar to what we can observe with regard to the strength of enacted carbon pricing policies. Governments go for more ambitious carbon pricing policies when their closest trade competitors and partners do so as well. In sum, our findings emphasize the strong role of trade-related aspects. Concerns over potential competitive disadvantages thus seem to constitute a major obstacle to policy diffusion and the strengthening of carbon pricing policies.Key policy insights The analysis demonstrates that both the adoption and ambition of carbon pricing policies (CPPs) is strongly driven by trade interdependencies, as well as concerns over competitive disadvantages on the global market: governments opt for more ambitious CPPs when their closest trade partners and competitors do so as well.This highlights the strong role of policy diffusion and pioneer states in the context of climate governance.Demonstrating and highlighting that fears over competitive disadvantages have generally not, so far, come to pass, might help to overcome key obstacles in national discourses on carbon pricing.