Confronting the political economy of climate change

Dave Wells, Arizona State University
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This material was originally created for Starting Point: Teaching Economics
and is replicated here as part of the SERC Pedagogic Service.


This illustration shows where politics and economics collide in the context of climate change. It can also be used to illustrate why cap and trade has won out over carbon taxes in the political arena, though even that may not survive politics.

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Learning Goals

Students learn that "the answer" in economics may not work in the political world, so are forced to consider other factors that help shape the public policy that we see.

Context for Use

Ideal for showing students the challenge of integration, when disciplinary perspectives are in conflict or helping bridge from an idealized economic world to the actual policy-making world.

Description and Teaching Materials

Part 1 Economic Theory:
Discuss the two predominant economic approaches to climate change: cap and trade and a carbon tax.

See if students can use economic models to identify how each works (and this can be buttressed with climate science on which it would be based in terms of trying to obtain outcomes).

Then using only economics (buttressed by climate science) determine whether cap and trade OR a carbon tax would be the best approach.

(the answer in economics is the carbon tax--and some of the reasons can be found at the Carbon Tax Center web page)

Part 2 Politics:
First think about the positions of the major parties on climate change--one sees it as far more urgent and more likely to be caused by human activity than the other (and voters for these political parties show the same split). Democrats are more concerned; Republicans less so.

Now place your two economic solutions: Cap and Trade and a Carbon Tax in front of these groups

Have some groups in the class be Democrats and other groups in the class be Republicans. Have them identify their key views overall regarding the role of government and the importance of climate change--then have them assess these two possible solutions.

The winner by a landslide will be cap and trade (it has a hidden rather than direct cost to voters and looks to be more pro-business innovation--though that doesn't mean Republicans will want to do it). Democrats will gravitate to it--and to the degree Republicans are willing to have government take an active role, it's the only policy they'll consider.

Part 3: Sociology

So now students understand why the House narrowly passed a Cap and Trade bill in June 2009. Is the politics working? Now enter sociology (the role of power) in political economy.

Examine this short entertaining, but highly provocative video: Story of Stuff: Cap and Trade

Here you would be wise to stop on occasion to have students deconstruct what's being argued and see whether they agree or not, but key issues here relate to defining property rights in the context of the environment, assymetric power issues where politics includes some groups and their interests far more than others.

Take a critical look at the video and have discussions as you go forward.

Part 4: Assessment or Action

Students should now be in a position to reflect or write on it or in action-oriented classes possibly take action based on their conclusions.

Teaching Notes and Tips

Notes are included in the description.


Students could write a paper that illustrates their new more complex understanding of the political economy of climate change.

Alternatively, students might organize on campus based on what they've learned--by creating a forrum for a wider audience.

References and Resources

Story of Stuff animated video featuring Annie Leonard

Tax v. Cap and Trade, Carbon Tax Center, New York.