Greater potential to mobilise public support for policy

Choice of policy instrument and associated design features can affect public support for climate policies (see Drews and van den Bergh 2015). Empirical and experimental evidence shows that, holding constant non-policy-related factors, public support for restrictive climate policies depends on (i) the perceived benefits of the policy, (ii) the perceived personal and public costs of the policy, and (iii) the perceived distributional fairness of the policy (ibid, 860–63). Perceptions of benefits and costs are also influenced by people’s perceptions of the effectiveness of the policy, which are in turn affected by their understanding of the causal mechanisms by which the policy is supposed to achieve its objectives (ibid).

Scholars have identified various reasons, related to these factors, why people tend to prefer certain kinds of climate policy instruments over others (e.g. command and control regulation over market-based instruments) (Jenkins 2014; Karplus 2011; Rabe 2010) and, within a given class of policy instrument, certain design features (e.g. explicit earmarking of revenue from market-based instruments) (Drews and van den Bergh 2015, 863; Rabe and Borick 2012). What has not been analysed is the effect on public support resulting from whether the instrument targets the supply side or the demand side (controlling for instrument type and relevant design features such as, where applicable, revenue allocation).

We argue that, on each of the abovementioned three factors, supply-side policies are generally likely to attract higher public support than demand-side policies, all else equal.

Higher perceived benefits of supply-side policy

The first reason supply-side policies are likely to receive stronger public support is because they foreground (render salient) benefits that people value more.

Demand-side instruments (e.g. carbon pricing; carbon efficiency standards) typically focus on greenhouse gas abatement per se. But this is a weakly valued benefit. A common conclusion from climate-related public opinion research is that climate science is poorly understood and concern about the problem, though widespread, is shallow, i.e. it tends to be a low-salience, low-priority concern and individuals have a low “willingness to pay” for solutions (Ansolabehere and Konisky 2014; Guber 2003; Jenkins 2014, 470–72; van der Linden et al. 2015). This is unsurprising: the climate benefits of mitigation policies are diffused widely across time and space; they disproportionately accrue (and are perceived accrue) to future generations and people in other countries; and their magnitude is uncertain, meaning they are likely to be strongly discounted by voters (van der Linden et al. 2015). The weak valuation of climate benefits may also be linked to the perceived ineffectiveness of unilateral domestic climate policies in tackling global climate change (Drews and van den Bergh 2015, 860–61). In any case, insofar as they foreground climate benefits, demand-side instruments face major challenges in attracting strong public support (Jenkins 2014, 475; Rabe and Borick 2012). This challenge is often magnified in public debates about such policies: in their public-facing campaigns to discredit such policies, opposing interest groups can easily exploit the public’s weak valuation of climate benefits and doubts about the policy’s effectiveness, as exemplified by case studies of carbon pricing debates in Australia (Chubb 2014), Canada (Harrison 2012) and the US (Skocpol 2013).

By contrast, supply-side instruments typically target fossil fuels per se. Survey evidence suggests that people more readily link co-costs/co-benefits (environmental, health, security, social, economic) to specific energy sources than to the more abstract concepts of “carbon”/“climate” (e.g., Ansolabehere and Konisky 2014); and fossil fuels are well-understood commodities that many people more readily associate with a range of higher-priority, more localised and more immediate negative (non-climate) impacts, resulting in negative attitudes toward fossil fuels, especially coal (see Green 2018, section 3.1.1 and references there cited). These features give supply-side policies considerable advantages in attracting public support for climate policy. Relatively high public support for fossil fuel severance (resource extraction) taxes, even in climate-ambivalent, tax-averse north-American states and provinces (Rabe and Borick 2012, 377–79), provides circumstantial empirical support for these arguments.

The foregrounding of a wider and more valued set of benefits is also likely to make it easier for proponents of supply-side policies to “mobilise” the public to participate actively in (consciously or incidentally) pro-climate-policy political action (Bomberg 2012) because this: enables proposals to be framed in ways that are more resonant with voters and more resilient to counter-attack by opposing interest groups; facilitates alliance-building among diverse groups with wide-ranging concerns about fossil fuels; and facilitates network-building among groups at different advocacy- and policy-relevant scales (Green 2018). These are, additionally, positive feedback effects that increase the likelihood of stronger climate policies in the future (ibid).

Possible higher perceived distributional fairness and lower perceived costs of supply-side policies

The higher they perceive the costs of a climate policy to be (to themselves and to society more broadly), the less likely people are to support it, all else equal (Drews and van den Bergh 2015, 861–62). But the perceived fairness of the distribution of those costs across society also affects voter support for climate policies (ibid, 862). Survey evidence (Cai et al. 2010) and case studies from carbon pricing attempts in Australia (Chubb 2014) and Canada (Harrison 2012) suggest that people are more likely to support a climate policy where they perceive that the incidence of the policy’s costs will likely lie with polluting industries.

From the case studies just cited, it appears, further, that people tend to perceive that energy consumers will bear the incidence of costs imposed under carbon pricing instruments, which contributes to the weak public support for such policies. Undoubtedly, part of the perception is attributable to the policy instruments analysed in those case studies being “price” instruments, which foreground the price that consumers must pay on salient household consumption items like electricity and gasoline, making them less popular than “command and control” instruments that “hide the costs” of regulation (Jenkins 2014; Karplus 2011; Keohane et al. 1998; Rabe 2010; Rabe and Borick 2012). However, we hypothesise that part of the opposition to carbon prices is explained by the fact that the instruments are demand-side instruments. In a relevant supply chain, the formal incidence of demand-side instruments generally lies with, or close to, the end consumers. So too in the case of demand-side climate policies applicable to the energy sector: the formal incidence, or liability, typically lies with owners (or operators) of electricity generation facilities and petroleum distributors. The fact that consumers regularly buy electricity and gasoline, we suggest, makes consumers more readily perceive that the costs will be passed onto them. If this hypothesis is correct, it follows that people are more likely to perceive the incidence of supply-side policies to lie with fossil fuel producers, since the latter are more remote from consumers in relevant supply chains. Accordingly, we would expect that people would perceive the costs to themselves of supply-side policies to be lower, or the distribution of the costs to be fairer, or both—and thus support for such policies to be higher. The stronger preferences for fossil fuel severance taxes than for demand-side energy taxes in North America is again consistent with this hypothesis, though research designed to test this hypothesis is needed, and would be a valuable subject of future research.

Additionally, insofar as (the public perceives that) the fossil fuels mined or extracted in the relevant jurisdiction (e.g. country A) will be exported to another jurisdiction (e.g. country B), the effects of price increases on consumer surplus—which may well be large—will be felt in country B, not country A. Accordingly, voters in country A are likely to perceive that the personal costs of supply-side policies will be low (subject to concerns about production leakage), implying stronger public support for supply-side policy in country A (see also Rabe and Borick 2012, 377–79).

Different potential to mobilise fossil fuel industry support for policy

A major political barrier to the enactment of (ambitious) restrictive climate policies (Table 1, row 1) in the energy sector is the political mobilisation of industries that stand to lose from such policies. Fossil fuel producers are especially politically influential: they are characteristically well organised, capital-intensive, and own highly specific assets (Hughes and Lipscy 2013, 459); and they often have deep ties to the states in which they operate (Newell and Paterson 1998). Environmental nongovernmental organisations and green industries typically form coalitions supportive of climate policy, but these are typically weak compared with the power of the opposing coalition (Meckling et al. 2015). The political feasibility of climate policy improves when, all else equal, members of the opposing coalition are induced to switch from opposition to support.

Policy can be crafted so as to divide otherwise-opposed fossil fuel companies and recruit some of them to the supporting coalition. Here, two standard policy design features are most relevant. First, fossil fuel companies can be divided along “temporal” (incumbent vs new entrant) lines by using instruments that restrict new entrants. Bans/moratoria are particularly well-suited to this task, since precluding new entrants is the raison d’etre of such a policy. Second, fossil fuel companies can be divided along “sub-industry” (e.g. coal vs. petroleum) lines by applying the policy only to one or some sub-industries. Rational fossil fuel producers perceiving a risk of a tightening carbon budget constraint will support policies that require emissions reductions from other sectors, including other fossil fuel sub-industries, but which exclude their own sector.

While both restrictive demand-side and restrictive supply-side policies can be designed to have one or both of these features, the relative political feasibility of such demand-side vs supply-side schemes is likely to vary from case to case. In a given context (e.g. country A at time t), the industry structure (e.g. market concentration), industry size, and demand outlook for the products of (particular kinds of) fossil fuel suppliers relative to (particular kinds of) industrial fossil fuel consumers may be more conducive to policies targeting suppliers of a fossil fuel than consumers of that fuel (and these are all likely to vary systematically across fuel types). In other contexts, of course, the opposite may hold. For example, where some of a country’s fossil fuel production is exported, fossil fuel producers in that country are likely to prefer demand-side over supply-side policies, other things equal (cf. Harrison 2015, 39).Footnote 5

Given the high political value of strengthening the supportive coalition relative to the opposing coalition, considerations concerning the potential to win over fossil fuel (sub-)industries to supporting coalitions should be of great interest to policymakers. In light of the different coalitional implications they are likely to have in a given context, inclusion of supply-side policies in the policy toolkit (alongside demand-side policies) will expand the option set of policymakers confronted by powerful industries.

Greater potential to induce, sustain and escalate international policy cooperation over time

So far, we have focused on the effect of instrument choice at the domestic level. But of course, domestic climate policies both influence and are influenced by actors, institutions and ideas at the international level, and those emerging from within other countries. One relevant criterion of instrument choice, then, is the conduciveness of a policy instrument to international cooperation or transnational policy diffusion (cf. Hepburn 2006, 235), which can be specified as the extent to which a policy instrument can be expected to induce, sustain or escalate international policy cooperation or transnational policy diffusion.

Serious attempts at strong forms of policy linkage and harmonisation using demand-side carbon pricing instruments have been all-but-abandoned in the design of the Paris Agreement. Moreover, the significance of uniform territorial emissions accounting has been much diminished in the move away from a regulatory regime focused on technical compliance (as with the Kyoto Protocol) to a facilitative regime focused on mobilising political pressure to raise countries’ ambition, along multiple dimensions, over time (as with the Paris Agreement) (see the Electronic Supplementary Material in Green 2018). These political realities of the new regime have opened the space for new forms of instrument-specific international cooperation. There are two features of supply-side policies that make them potentially more conducive to international cooperation and/or policy diffusion.

First, if price elasticities of demand for a fossil fuel are high relative to supply elasticities for that fuel, supply-side policies will result in less international carbon leakage than demand-side policies (Lazarus et al. 2015, 14–15). Collier and Venables argue that, at least for coal, long-run elasticities of demand are likely to exceed those of supply because the many substitution possibilities available on the demand-side (other fossil fuels, renewables) “have no analogue on the supply side; producing less coal has no technological link to having a greater supply of oil, gas, or renewables” (Collier and Venables 2015, 497–98). Ultimately, determining the relative supply vs demand elasticities for each fuel type is an empirical matter that lies beyond the scope of this paper, and for some fuels the relative elasticities may vary from market to market.Footnote 6 But to the extent that supply elasticities are lower than demand elasticities, unilateral domestic supply-side policies would be more effective at reducing global emissions than their demand-side equivalents. That effect would be desirable on its own, but it would also help to build international cooperation: the emergence of international cooperation on fossil fuels is likely to be contingent on a coalition of early-movers taking unilateral steps to limit or reduce fossil fuel supply (i.e. “leading by example” and then persuading or incentivising other states to adopt similar restrictions: Green 2018); low international leakage rates associated with supply-side policies would encourage the necessary unilateral action.

The second feature is the relative ease with which supply-side policies can be monitored and verified (see Section 3.1). Were states to commit internationally to implement supply-side policies, the ease of MRV would mean third states (and other third-party agents, such as nongovernmental organisations) could readily verify compliance with those international commitments (Collier and Venables 2015, 501, 506–7; Kerr and Duscha 2014, 599). This matters greatly for international cooperation because when states know that compliance can easily be verified by third parties, they are more likely to comply (Chayes and Chayes 1991, 320–21). Moreover, mutually verified compliance builds trust among states, which encourages states to escalate their commitments over time as repeated cycles of reciprocal action-and-verification build their confidence in the integrity of a cooperative regime (Bell et al. 2012; Victor 2011). This kind of gradual escalation strategy has proved successful in other international policy domains where reliable and timely verification was feasible and emphasised (Bell et al. 2012; Victor 2011). Since the Paris Agreement’s success is predicated on states’ gradual escalation of their commitments over time, commitments to implement supply-side policies offer major advantages as a “currency” of international climate cooperation (e.g. as key measures in countries’ Nationally Determined ContributionsFootnote 7). By contrast, attempts to build international cooperation using demand-side instruments are beset by seemingly interminable, trust-sapping arguments about accounting rules and verification mechanisms for greenhouse gas emissions (see, e.g., Kuch 2015).