Political conflict and climate policy: the European emissions trading system as a Trojan Horse for the low-carbon transition?

Abstract

ABSTRACT Many economists, businesses, and policymakers view carbon pricing as the single best policy approach to address climate change. Such optimism, however, tends to neglect the political conflicts surrounding climate policy and the necessity to accelerate the ongoing low-carbon energy transition. To unveil these conflicts, we analyze the responses of key actors to public consultations in 2015–16 concerning the EU emissions trading system (ETS) and the EU renewable energy directive. From this, we identify a prominent policy position contending that climate policy should focus on the ETS given its purported efficiency. Some actors who share this position use the ETS as a Trojan Horse – a strategy to divert attention from, and fend off, more ambitious climate action in the form of complementary renewable energy policies. Such political strategies do not just undermine carbon pricing but impede the energy transition at large. However, we also find energy industry incumbents that express support for a much stronger ETS and more effective climate policy. Therefore, it seems that the ‘Trojan Horse strategy’ may fail and the low-carbon transition might gain increasing support from a broad range of stakeholders. Even so, we argue that any singular climate policy approach risks political capture and that a mix of policies will be necessary to accelerate the ongoing transition. Key Policy Insights Major European industry actors tend to advocate the EU ETS as the primary climate policy instrument. Some European industry actors have used the EU ETS as a Trojan Horse – to fend off strict climate action and to slow down the low-carbon energy transition. Political conflicts surrounding individual climate policies reflect much larger struggles over the direction and pace of the energy transition. Climate policy should not rely too heavily on a single instrument but rather include a mix of measures that promote both low-carbon innovation and the decline of carbon-intensive industries, technologies and practices.