The Political Economy of Climate Policy

Abstract

Implementation of policies and measures is an important feature of effective climate policy design. In the political decision process, implementation depends to some extent on interest group influence. This project deals with business interest groups influencing climate policy making in Switzerland and the European Union. The public choice literature provides multiple reasons for organizations to become active as ‘institutional entrepreneurs’ (1). Firms may develop non-market strategies in order to dilute or postpone stringent legislation, or penalize competitors, e.g. by lobbying for ambitious technology standards. Voluntary approaches have become known as possible strategy for pre-emptive behaviour (2). In Switzerland, one famous example is the implementation of the climate cent in 2005, replacing the CO2 tax on transport fuels until present (3). The first part of the analysis deals with the positions of firms on climate policy. Document analysis of the consultation on the Swiss CO2 law in 2009 shows a pluralist landscape of industry positions. We find that the business community is no solid block opposing climate legislation but a broad field of firms with multiple positions on climate policy, including opponents and proponents. Economic sectors opposing climate legislation are oil and refineries, the heavy industries, and road transport. Proponents of climate policy are renewable energies, forestry and timber production, finance and insurance, building services and manufacturing, and Swiss retailers. Peak business associations and road transport associations tend to overestimate the costs of climate policies and measures for their businesses, whereas firms that are not owned by shareholders tend to show more environmental responsibility. The second part of the analysis compares the arguments provided in the consultation documents with the parliamentary discourse in Switzerland. We assess the degree of interest group representation as proxy for political power of business actors in political decision making. It turns out that peak industry associations, the oil industry, and road transport associations seem to have considerable influence on Swiss climate policy making. Finally, a case study on the voluntary agreement, signed by the Swiss car importers and the Swiss Federal Council in 2002, illustrates our theoretical propositions on non-market strategies in climate policy for Swiss road transport. The findings are likewise reflected in the case of the voluntary agreement signed by the association of European car manufacturers in 1998.