Varieties of market-based policy: Instrument choice in climate policy

Abstract

ABSTRACTSince the 1970s, European and US regulators have used different varieties of market-based environmental policy, which are rooted in competing types of liberalism: price instruments and quantity instruments, respectively. In the case of climate change, however, the EU and the US have converged on hybrid policy mixes. This convergence in instrument choice is examined in two cases: the emergence of the EU Emission Trading Scheme, i.e. the import of quantity regulation to the EU; and the creation of California’s feed-in tariff, i.e. the import of price regulation to the US. Increasing convergence in instrument choice is the result of international diffusion through learning and shifting domestic coalitions. This demonstrates that the two varieties of market-based environmental policy increasingly blend, and how policy import is driven by domestic government–producer coalitions rather than by policy-maker ideas of ‘best practice.’