Carbon Pricing, Green Industrial Policy, and the Evolution of Ideas in EU Climate Policy
Published in the Journal of European Public Policy [DOI]
Abstract
Market environmentalism has traditionally been the dominant paradigm in global climate policy. It views climate change as a market failure and considers carbon pricing the optimal solution. Over the past two decades, a different policy paradigm that builds on the principle of catalytic action has become dominant. This ‘catalytic decarbonization’ paradigm views climate change as an investment problem and demands industrial policy over carbon pricing. I build on these observations to trace the evolution of both sets of ideas in EU climate policy and to identify patterns and mechanisms of change. I find that market environmentalism was particularly dominant in the 1990s and early 2000s. However, it was from the beginning blended with ideas related to catalytic decarbonization. The lack of international commitment to carbon pricing, the momentum for investment-based climate action after the financial crisis, and the simultaneous diffusion of green industrial policy in the late 2000s and early 2010s led the EU to transform its approach to climate policy and made catalytic decarbonization the dominant paradigm. This shift unfolded progressively and did not result in a full abandonment of market environmentalism. Instead, EU institutions served as bricoleurs, repurposing and recombining existing ideas to adapt to changing circumstances.