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

Abstract

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.