Are carbon regulators the next big thing?

States are making extraordinary commitments as concern about global emissions gives way to panic. The idea of net zero emissions in three or four decades, announced by many countries, accords to the state an exceptional amount of power across many spheres of economic and personal activity. This throws open the possibility of new and powerful institutions that quickly funnel economies into low-carbon trajectories. They are made more likely by the dire science that underlies our visions of planetary crisis. One evocative version of this institutional model is a legally independent carbon regulator that clinically restructures policies and incentives to its will. Could such bodies become this century’s major addition to the idea of the state?

The thought is not entirely outlandish. A widely discussed governance model being tried in the UK, that of a ‘Climate Change Committee’ (UKCCC), has primordial regulatory features. A body of experts sets non-binding carbon budgets across ministries and tightens these budgets over time to bring emissions in line with long-term targets (in this case a net-zero target by 2050). The government must provide reasons for non-compliance in Parliament. The model works through accountability rather than fiat. Decarbonization, notes Lockwood (2013), was too political to delegate to a technical committee. The Act that created the body was passed in 2008, much before our current sense of urgency. Newer iterations of this model might be less subtle in their orchestrations of power.

The idea of an independent carbon regulator will be understandably divisive. To proponents of quick decarbonization, it is an antidote to political inertia at a time of civilizational crisis. To others, it will raise serious questions about the boundaries of state power, and concerns about opaque, technocratic processes undermining the idea of democracy. Similar debates continue to play out in relatively mature provinces of the state, such as independent monetary policy and political oversight of the judiciary.

The neat functionalist explanation that supports the spread of the sort of body seen in the UK, perhaps with more teeth, is based on the idea that countries will increasingly come under pressure to (a) demonstrate ambition, (b) show that those commitments are credible, and (c) actually reduce emissions. In this context, institutional models that signal a higher possibility of meeting these goals could enjoy widespread popularity.

The global diffusion of institutional models is a powerful undercurrent that flows beneath the structure of the modern state. Three major diffusion processes in the last century - the spread of independent central banks, environment ministries, and human rights commissions – allow us to crudely isolate the conditions under which institutional models spread, and then ask whether such conditions exist in climate politics today. In this piece, I compare analyses by Marcussen (2007) on central banks, Aklin and Urpelainen (2014) on environmental ministries, and Pegram (2010) on national human rights institutions to understand what those conditions might be. These institutions are salient to this discussion about carbon regulators because they carry with them varying degrees of independence from the executive and, if they work correctly, impose restraints on political power.

An important theme running through these cases is the relevance of external forces in getting states to start thinking, and governing, similarly. A century ago, powerful central bankers in the US and UK forced a new normative baseline for banking practices by making lines of credit contingent on the establishment of a central bank. They also harnessed consensus about appropriate institutional form in the League of Nations to create a system of supranational surveillance. By the end of the century, the idea of central bank independence spread like wildfire (see figure below) because of a new macroeconomic orthodoxy promoted by the IMF and World Bank that stressed central bank independence. Yet again, conditional finance made states receptive to institutional reform.

Figure 1. Central bank independence becomes a norm in the 1990s (from Marcussen 2007)

Similarly, the origin and spread of environment ministries can be traced to an emerging international consensus about the importance of the environment in the 1970s. The first environment ministries in the world (the UK in 1970 and Iran in 1971) were established around the Stockholm Summit of 1972, and the single biggest driver of the global spread of environment ministries was the Earth Summit in Rio in 1992. The pace of diffusion slowed after 1995 partly because international pressures relented, argue Aklin and Urpelainen. Similarly, Pegram notes that human rights ombudsmen and commissions diffused with the support of multiple branches of the UN system, international financiers, and global civil society.

International conditions in climate politics are ripe, but there are three missing elements. The first is consensus around an appropriate institutional model which, given the nascent state of experimentation in climate governance, is still some way off. The second is the marked polarization that characterizes interactions between developed and developing countries. Monetary policy, human rights and the environment were arguably more open to a common orthodoxy that manifested in institutional language. Third, even if there were consensus around the regulatory structure, there is no international apparatus for institutional surveillance. With central banks and human rights institutions, international organizations played an invasive role that created uniformity across states.

The second variable is powerful but amorphous: the importance of credibility in world politics. Several states newly formed in the 1990s, for example, sought to establish their international credentials by pursuing progressive reforms in a liberal world order, leading to a spurt in environment and human rights institutions. Marcussen notes that the end of the Napoleonic wars heralded the creation of several central banks. These governments had generated high inflation rates through the profligate issue of currency for wartime finance; the establishment of central banks gave them the credibility to attract much needed foreign finance. Over 90% of states that attained independence just after World War 2 have established central banks, half of them did so just five years after independence. Meyer et al. (1997) point to these unmistakable similarities, sometimes incongruent to local context, when they talk about “the nation state as a culturally constructed actor.”

Finally, propitious domestic politics can make countries more receptive to new institutional ideas. The papers argue that environmental and human rights institutions were signals from newly democratic governments eager to pivot towards agendas of broad electoral appeal. With central banks, the fervent support of national macroeconomic elites, who were communicating with each other through transnational channels, gave the idea of central banks nearly invincible momentum through the latter half of the 20th century. In cases where climate action is politically destructive, a hypothetical carbon regulator will likely be a tame force. But that is not to say that a weak institution is inconsequential. With central banks, for example, institutional development came in waves. Hollow shells could fill out when the underlying politics shifts.

Is a carbon regulator inevitable? It could be argued that elegantly articulated, durable, and popular institutional ideas like central banks and national human rights institutions are like Haley’s comet: infrequent. But the probability of such a model is increasing across the three variables discussed in this article. International pressures are building, credible commitment problems are being created by a slew of net zero targets, and domestic politics is supportive of decarbonization in some countries. If the idea gains traction, the debate will almost certainly replicate schisms in global climate politics. The idea will be resisted with arguments that it reinforces North-South inequity and short-circuits historical responsibility. The Global South, less responsible for global warming, might only establish weak versions if pushed by emerging global norms. Carbon regulatory institutions will probably be endemic to the developed world to begin with, part of a diversity of carbon governance systems.

(This blog piece is based on a multi-year project at CPR called Varieties of Climate Governance, where we compare the evolution and functions of climate institutions in eight major emitters. See a video introduction to the project here. Peer-reviewed papers from the study will be published later this year.)

Environmentality is a collection of ideas, perspectives, and commentary by researchers at the Initiative on Climate, Energy and Environment, Centre for Policy Research, New Delhi. Views and opinions expressed in this blog are solely those of the authors. They do not represent institutional views.

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