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The political climate trap

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  • Delfgaauw, Josse
  • Swank, Otto

Abstract

We develop a simple political-economic model of a climate trap. We apply our model to gasoline taxes, which vary dramatically across countries. Externalities cannot fully account for this. Our model shows that group interests, resulting from the composition of a country’s car fleet, can explain differences in gasoline taxes even among countries with identical fundamentals. Endogenous car ownership can yield multiple equilibria. This can lead to a political climate trap, where a low gasoline tax reflects the views of a majority, but another majority would benefit from transitioning to a high-tax equilibrium with fewer emissions.

Suggested Citation

  • Delfgaauw, Josse & Swank, Otto, 2024. "The political climate trap," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:jeeman:v:124:y:2024:i:c:s0095069624000093
    DOI: 10.1016/j.jeem.2024.102935
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    More about this item

    Keywords

    Median voter; Gasoline taxes; Multiple equilibria;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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