Institutions and Agency in the Making of Carbon Pricing Policies: Evidence from Mexico and Directions for Comparative Analyses in Latin America

ABSTRACT

The article uses a dynamic political economy framework to contend that the adoption of a carbon pricing policy (CPP) is better understood as a process whereby policies are constructs embedded in both power dynamics and institutional frameworks. While an institutional perspective clarifies why Latin American nations have tended to enact carbon taxes over emission-trading systems, institutional-based explanations reach their limits once policymakers consider the design of a specific CPP. The article uses a Latin American resonance group to evidence the relevance of institutions, and then traces the stages of the policy process of the Mexican carbon tax to elucidate that the lack of ambitiousness of most CPPs results from the strategic calculations of actors with the ability and resolve to shape carbon prices, the emission-intensive, trade-exposed industries.

KEYWORDS:

• carbon taxes
• emission-trading systems
• process tracing
• stage heuristics framework
• resonance group
• comparative policy analysis
• Mexico

Acknowledgements

The author appreciates the insightful comments of Todd Eisenstadt, three anonymous reviewers, and the support of the División de Estudios Internacionales (CIDE).

Notes

1. Grandparenting refers to the distribution on free allowances based on historical emissions.

2. When disaggregated by member, the 30 ETSs yield a large number of jurisdictions. The EU ETS alone has 30 members, and a dozen US states the Regional Greenhouse Gas Initiative.

3. Emission intensity captures the level of emissions per unit of economic activity (usually GDP), while exposure refers to the dependence of the income on traded goods (see PMR 2016).

4. Currently, Mexico is the only Latin American country with a pilot cap-and-trade, which is still non-binding.

5. The agreement between party leaders sufficed given the relatively high party discipline in Mexico (see Rodríguez and Santacruz 2015).

6. A non-profit organization led by 1995 Nobel Prize winner Mario Molina(chemistry) that finds science-based policy solutions to environmental and energy issues and generates consensus with public decision-makers to implement them.

7. One advocated for unifying the fiscal framework for CSOs, another for taxing caloric beverages, and the third demanded a corruption-free fiscal system.

8. In contrast, the discussion of Value Added Tax had 927 mentions and income tax 545.

9. After a contentious series of exchanges between the PRI and the main opposition PAN (see Elizondo 2017).

10. Following a market logic, fossil fuel and power producers would lead a steadfast transition to a lower-emission economy, given the growing competitiveness of renewables. However, renewable energies worldwide must fight to challenge the institutional embeddedness of fossil fuel industries in order to earn a place in the vested interest structure (see Moe 2015).

Additional information

Funding

This work was supported by the American University Doctoral Student Research Scholarship, American University[Doctoral Student Research Scholarship].

Notes on contributors

Daniela Stevens

Daniela Stevens is an Assistant Professor at CIDE. She obtaineda PhD in Political Science from American University at WashingtonD.C. in 2019 and a Masters Degree from El Colegio de México. Shewas a Fox International Fellow at Yale University in 2011-2012.