Climate policy will involve a dramatic renegotiation of the institutions that structure economic and social activity within industrialized economies. However, the timing and content of climate policy has varied dramatically across OECD countries. This paper explores large variation in the trajectory of carbon pricing policy debates within advanced economies. Variation includes: whether countries have proposed or enacted a form of carbon pricing policy; when they have enacted such policies; the overall levels of costs the reforms impose; and the ways in which these costs are distributed across political, economic, and social actors. At a minimum, carbon pricing policies constitute significant shifts in the indirect tax system of a country; at the extreme, they can constitute major shifts in economic, industrial and environmental policies, dramatically changing flows of costs and benefits to social and political actors. Because the details of a particular carbon pricing policy and the political context in which it is proposed both matter, detailed qualitative analysis of a policy’s content and political bargaining over the policy is necessary to investigate the mechanisms that shape policy outcomes over time.

This paper advances a new theory to explain variation in the timing and ambition of domestic carbon pricing policies that pays particular attention to how the political incentives to enact climate policy vary across policymaking contexts and party systems. First, the theory emphasizes links between organized economic interests and party politics. The paper argues that, while left-wing parties are more likely to propose new climate policies, the ambition of these policies is mediated by the presence of organizational links to industrial trade unions in emissions-intensive economic sectors. Instead, centrist parties and small parties with few institutional ties to emissions-intensive sectors have tended to propose and pass the most ambitious domestic carbon pricing policies. Second, the paper explores variation in the institutional access of organized economic interest to the policymaking process. In social-corporatist economies, emissions-intensive actors have supported early introduction of carbon pricing policy because their access to policy design efforts can pre-empt measures that pose a significant economic threat. By contrast, in more liberal economies, emissions-intensives industries mobilize in the public domain to change the electoral incentives associated with bringing climate policy onto the political agenda in the first instance. While fewer climate policies emerge in these countries, climate policies that eventually do reach the agenda tend to pose a deeper economic threat to emissions-intensives economic sectors. The theory is supported by quantitative analysis of a new cross-national dataset, and by detailed qualitative fieldwork in the United States, Australia, Norway and Germany.