The politics of carbon taxation: how varieties of policy style matter

ABSTRACT

The momentum achieved for unilateral carbon taxes in seven European countries is examined. Why is it that small countries, despite being vulnerable to forces of international competition, have been able to implement carbon taxes? A review of national experiences does not suggest that the share of fossil fuels in the energy mix defines the room for such taxes, or point to a strong role for traditional left-right ideology. Rather, it is deep-seated patterns of national policy styles with neo-corporatist traits, providing a protective device for the open economies of small countries, which condition the introduction of carbon taxes. The associated routines of decision-making offer coordination mechanisms for proactive macroeconomic policies in which carbon taxation can find a place. Parliamentary democracies with proportional representation, as is common in the smaller countries, provide access to government for political parties that pursue carbon taxation. These in turn sensitise larger political parties to climate concerns, as they benefit from institutionalised practices and routines for problem-solving and consensus-seeking.

KEYWORDS:

• Policy style
• neo-corporatism
• varieties of capitalism
• climate policy
• carbon pricing
• pollution tax

Acknowledgments

Participants at the ‘Climate Politics in Small States’ workshop at Dublin City University June 2016 and the INOGOV workshop ‘Pioneers and Leaders in Polycentric Climate Governance’ Hull (UK) September 2016 provided stimulating comments and suggestions. I am grateful to two anonymous reviewers and the special issue editors for constructive and insightful remarks.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. A carbon tax is defined as a tax levied on the carbon content of fuels (Yokoyama et al. 2000).

2. A carbon price floor for emission allowances introduced in the UK (2013) applies to electricity only and is not an economy-wide carbon tax scheme as such. Poland’s levy on carbon is part of a general air pollution tax and not a distinct carbon tax, and Ukraine’s CO2 charge is set at a symbolic rate of about USD 0.02/tCO2.

3. Norway, Iceland and Switzerland are not EU Member States, while Croatia only recently became so (2013).

4. For a detailed review of tax bases and tax rates see Andersen (2015) and OECD (2016).

5. The Socialist People’s Party, which ‘has been in many respects a traditional green party, with a participatory and egalitarian culture and a strong emphasis on environmental policies’ (Kosiara-Pedersen and Little 2016).

6. The Cohesion Fund, set up in 1994 by Council Regulation (EC) 1164/94, provides funding for environmental and trans-European network projects. The first generation of countries eligible for support included Greece, Ireland, Portugal and Spain.

7. Being more likely to enact carbon taxes is, however, a relative phenomenon. With the Paris Agreement the world has moved beyond unilateral action, prompting larger countries, such as Mexico, Chile and South Africa, to announce carbon taxes.

Additional information

Funding

This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.