Climate Policy

| Politics and Governance |

17 March 2022

Carbon Pricing in the US: Examining State-Level Policy Support and Federal Resistance

Easwaran Narassimhan, Stefan Koester and Kelly Sims Gallagher


Carbon pricing is a key policy instrument used to steer markets towards the adoption of low-carbon technologies. In the last two decades, several carbon pricing policies have been implemented or debated at the state and federal levels in the US. The Regional Greenhouse Gas Initiative and the California cap-and-trade policy are the two regional policies operational today. While there is no federal policy operational today, several carbon pricing proposals have been introduced in Congress in the last decade. Using the literature on interest group politics and policy entrepreneurship, this article examines the carbon pricing policies at the subnational and federal levels in the US.

First, the article explores the evolution of two main regional carbon pricing policies, the Regional Greenhouse Gas Initiative and California cap-and-trade, to identify how interest groups and policy entrepreneurs shaped the design and implementation of the respective policies.

Second, the article details the federal carbon pricing policy proposals and bills discussed in the last decade.

Third, it examines the factors that limit the prospects of realizing an ambitious federal carbon price for pursuing deep decarbonization of the US economy.

The article finds that federal carbon pricing in the US suffers from the lack of any natural and/or consistent constituency to support it through policy development, legislation, and implementation. While interest group politics have been mitigated by good policy entrepreneurship at the subnational level, the lack of policy entrepreneurship and the changing positions of competing interest groups have kept a federal carbon pricing policy from becoming a reality.

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