Are climate change policies politically costly?

Are policies designed to avert climate change (Climate Change Policies, or CCPs) politically costly? Using data on governmental popular support and the OECD's Environmental Stringency Index covering 30 countries between 2001 and 2015, our results show that CCPs are not necessarily politically costly: policy design matters. First, in contrast to non-market-based CCPs (such as emission limits), only market-based CCPs (such as emission taxes) entail political costs for the government. Second, the effects are only present when CCPs are adopted during periods of high oil prices, prior to elections, or in countries depending strongly on non-green (dirty) energy sources. Third, CCPs are only politically costly when inequality is high and/or social insurance/transfer does not sufficiently address the regressivity of CCPs. Our results are robust to numerous robustness checks including to address concerns related to endogeneity issues.

Automated summary

Using data on governmental popular support and the OECD's Environmental Stringency Index, this study finds that Climate Change Policies (CCPs) are not necessarily politically costly, as policy design and socioeconomic factors play important roles. Market-based policies, high oil prices, election cycles, and reliance on non-green energy sources are associated with higher political costs. Moreover, high inequality and inadequate social insurance exacerbate the regressivity of CCPs, resulting in political costs. These findings are robust to various sensitivity analyses.