The Storied Teller: To Tax or Not to Tax

Michael L. Ross unpacks the enduring problems plaguing climate politics.

In the January 2025 (Volume 77, Number 1) issue of World Politics, Michael L. Ross, professor in the Department of Political Science and the Institute for the Environment and Sustainability at the University of California-Los Angeles, weighs various approaches to the climate crisis in his book review article, “The New Political Economy of Climate Change.” 

Economists’ and political scientists’ work on climate change offers two different sets of action, Ross explains. Economists tend to look for market-based solutions, while political scientists often emphasize “interest groups, social movements, and political institutions.” To examine both approaches, Ross brings to bear three books, all published in 2020, that provide further nuance to the politics of climate change. 

In our Storied Teller series — designed to extend World Politics’ content to a nonacademic audience — the journal’s executive editor Emily Babson speaks with Ross about his article and how he foresees the issue of climate change playing out on the American front and beyond. 

Let’s begin with a rundown of each book that you examine, starting with Leah Stokes's “Short Circuiting Policy: Interest Groups and the Battle Over Clean Energy and Climate Policy in the American States.” 

The book examines three decades of state-level political combat in the United States over clean energy policies and underscores the role of electric utility companies. Normally, we look at politics at the national level, but in the U.S., 25% of all carbon emissions come from electric utilities, which are regulated at the state level. The book takes on this very complex and opaque issue of how you deal with the regulation of electricity, often something only fought over by a handful of experts and interest groups. It highlights how incredibly important these regulatory issues are and points out that advocates for wind and solar power are losing as the carbon-industry interest groups mobilize against them. And yet, environmentalists sometimes make surprisingly fast and important gains. 

The second book, Matto Mildenberger's “Carbon Captured: How Business and Labor Control Climate Politics,” focuses on national-level politics in Australia, the U.S., and Norway, and emphasizes the decisive role of labor unions. Tell us about that.  

Mildenberger's book takes on a really interesting puzzle, which is why left-leaning governments have sometimes made so little progress on climate issues. In each of the three considered countries, labor unions have a lot of workers in the fossil-fuel sector. The left-leaning parties in those countries all are closely tied to and rely on support from those unions. Often, not always, labor unions have acted as advocates for the fossil-fuel industries and given them what he calls double representation. That is, not only are oil and gas and coal industries fighting for their own interests, but labor unions are often fighting for those same interests. He shows how unions can be the swing players: sometimes in favor of and sometimes opposing climate action — and that has deep consequences.

Last, there’s Kathryn Hochstetler's “Political Economies of Energy Transition: Wind and Solar Power in Brazil and South Africa.”

The major industrialized countries of the West, historically the biggest carbon emitters, today have falling emissions levels. But carbon pollution is rising quickly in the countries that Hochstetler looks at, not just South Africa and Brazil, but the whole category of what are called “The Late Industrializers:” countries like Indonesia, Nigeria, Vietnam and China. Political scientists have paid much less attention to how decisions are being made around climate issues and emissions in those countries. 

In the cases Hochstetler looks at, the state is not a neutral arbiter, but itself an interest group. It plays a more aggressive role, sometimes because it represents and owns the company that produces fossil fuels, sometimes because bureaucrats are competing for some of the profits from the energy industry and sometimes just because the country has other priorities. 

A term that comes up quite a bit in your article is “carbon pricing.” Can you define that? 

Essentially it means policies to make fossil fuels more expensive. The idea being: a straightforward way to reduce emissions is by making fossil fuels more expensive, causing people to use them more sparingly or start using alternative fuels. The term is opaque by design because saying “carbon tax” automatically makes it unpopular, but “carbon price,” might fly a little more easily. 

Carbon taxes have a certain logic. For example, every time we buy a cheeseburger, we're purchasing something whose production involved the release of greenhouse gases – causing global damage that no one has to pay for. Economists refer to that unpriced damage as “a negative externality.” It's an external cost imposed on others. 

If you made a carbon tax expensive enough, it would encourage people to reduce their carbon footprint (and perhaps eat fewer cheeseburgers), but taxes tend to be unpopular and can lead to political backlash. But there are other ways to impose carbon taxes: the European Union has a cap-and-trade system that places the cost of carbon emissions on companies. Now, that cost might be passed on to consumers, but it's going to be harder to detect.

The European Union's cap-and-trade program, known as the Emissions Trading System, has been effective. Why?

A couple of reasons. One is that Europeans have historically been more comfortable paying higher taxes, partly because they have more confidence in their governments. The other is that the Emissions Trading System was put in place in 2007, and the effects were minimal for a long, long time. People kind of forgot that it was in operation and didn't feel any effects. It's only after it had been in place for almost a decade that prices were raised to a level where they began to affect companies. The gradualness also made it less visible to consumers. In the U.S., when we buy something at the store, we see precisely how much tax we’re paying when we look at our receipts. With the Emissions Trading System, those taxes are hidden in the prices of the goods themselves and, consequently, people are less likely to object.

Let's talk about the U.S. Why are Americans especially reluctant to pay higher energy prices to reduce carbon emissions?

Americans, really since the founding of the country, have been especially hostile toward taxation. It’s closely tied to Americans being suspicious of government. Contrast that with European countries, where there's a greater sense of confidence in government programs and a higher level of comfort around paying taxes. And Americans seem to be especially sensitive to fossil fuel prices in ways that they're not sensitive to other commodity prices. For example, I think most Americans could probably tell you, without thinking about it, what the cost of a gallon of gasoline is.

Is something like a cap-and-trade system feasible in the United States?

There's a consortium of states in the Northeast and another on the West Coast that uses a tradable permit system at the state level to try to encourage companies to reduce their emissions. It has been successful, I think, in pushing down emissions. Has it made enough progress? No. It only applies to some sectors of the economy and some kinds of emitters. There are various loopholes and limits to its effectiveness. But partly because it’s less visible, I think, it's also been easier to sustain politically.

The problem today is that the issue of climate change has become increasingly polarized along partisan lines. These kinds of policies are generally limited to blue Democratic-leaning states and are considered politically toxic in red Republican-leaning states. Not necessarily because they wouldn't work in red states, but because they're associated with the Democratic Party and environmental advocacy, they're automatically very unpopular.  

You write that "Climate change is occurring in a world where policies are shaped by powerful interest groups, self-interested politicians, collective-action failures, and political institutions with their own path-dependent logic." So which climate policies can be implemented and sustained under these conditions? 

A growing number of political scientists argue that climate policies should offer near-term benefits to citizens, thereby generating constituencies that will defend these policies. So, how do you build a constituency that directly benefits from the policies you put in place when the beneficiaries are diffused around the world and over time? Take for example the Biden administration's Inflation Reduction Act, which is building lots of new factories and businesses to promote a clean-energy economy. That is a policy that was specifically designed with politics in mind: It has almost no sticks and many, many carrots. It provides lots of benefits to communities around the country, often Republican-leaning parts of the country. Climate advocates are gambling that, with Republicans in control of the federal government in the coming years, there will be so many people who benefit from Biden’s policies that the government will be reluctant to pull them back.

With the carbon tax, people see the costs, but they don't see the benefits. But if you're building lots of new plants to make new solar cells and batteries, then you see the benefits up front in your communities. And the costs are there, but they're kind of buried in the budget deficit, which people are not paying much attention to right now.

How do you think the next Trump administration will affect the climate change policy agenda in the United States?

Dealing with something as complex as climate change requires us to hold sometimes contradictory ideas in our heads, and I'm going to give you two somewhat contradictory thoughts about the consequences of a Trump administration. On one hand, there are innumerable ways that the federal government affects climate emissions, and we know that every tiny little bit of difference in emissions can have long-term impacts, so it's going to be very, very important in more areas than we can possibly count today, and that worries me deeply. 

On the other hand, there's a sense in which a lot of the world's trajectory toward reducing emissions is already set and determined by large economic forces and technological innovations that the Trump administration doesn't really have much impact on. For example, Trump in his first term tried to revive the coal industry and encourage utilities to use more coal, and yet coal plants continued to shut down, and carbon emissions continued to decline in the U.S. I think it's also important to remember that in the big picture, there are many factors beyond what the Trump administration can affect that will determine our success.

To read Ross's World Politics article, “The New Political Economy of Climate Change,” visit Project Muse. And listen to the article's Abstract for free on Soundcloud.