The Political Economy of Carbon Pricing and Green Finance. Comparing the EU and Japanese Discourses and Policy Approaches

Climate change is one of the most fundamental and urgent challenges of human civilization. To achieve the goals of the Paris Agreement, i.e. to limit global warming to below 2, and preferably below 1.5 degrees Celsius, human activities which result in greenhouse gas emissions will have to be drastically reduced.

From an economic point of view, the production of greenhouse gases is an externality. Theoretically, there are a variety of policy instruments on how to internalize the costs associated with greenhouse gas emissions, for example: regulations, which forbid respective activities, the taxation of emissions, the allocation of emission rights through carbon trading (carbon pricing), or the incorporation of climate policy goals into financial investment decisions (green/sustainable finance), including monetary policy conducted by central banks.

This study group brings together experts from academia, business, and non-profit organisations to compare the dominant discourses and policy approaches in the EU and Japan with regard to taxation, carbon pricing, and green finance: What actors are shaping public discourses and policy making? What are their channels of influence? What are the politically preferred policy instruments? How are they designed?

The goal is (1) to deepen the mutual understanding between EU and Japanese policy makers about approaches and experiences of combating climate change by implementing economic and financial incentives, (2) to better understand how the political economy influences climate policy choices, (3) to learn how the design of policy instruments can help to overcome political resistance.