Hybrid Climate Policy Instruments Can Substantially Reduce National Carbon Pollution

Abstract

Countries around the world require ambitious and effective policy instruments to mitigate climate change. Yet, many governments have struggled to pass efficient, economy-wide carbon prices. Instead, climate reforms often comprise hybrid policy instruments that bundle pricing, regulatory, and subsidy-based measures in a complex distributive bargain between producers, consumers, and government actors. Here, we estimate the causal effect of one major hybrid climate reform - the United Kingdom's 2001 Climate Change Programme (CCP) - on the country's carbon pollution trajectory. Using synthetic control methods, we show that, in 2005, the UK's CO2 emissions were 9.8% lower relative to what they would have been if the CCP had not been passed. Our results offer empirical confirmation that hybrid policy instruments can unilaterally reduce domestic carbon pollution, even after making concessions to producers, and in the absence of a legally binding global climate treaty.