1.1.1 Dimensions of Economisation

Economisation as defined here entails both an issue that is addressed by economic actors (including institutions in the sense discussed in Section 1.2) and framed as an economic issue. I refer to the former as the first aspect of economisation and the latter as the second aspect, although this does not imply that the first aspect necessarily takes place before the second. Framing climate change in (mainstream) economic terms usually centres on defining the policy problem as an externality. An externality is the cost or benefit of an activity undertaken by one actor that affects another actor not involved in the activity, thus creating a suboptimal situation, since the cost of the activity does not reflect the true costs or benefits to society (Reference PigouPigou, 1932). Since the concept of an externality belongs to the wider class of concepts of ‘market failures’, climate change has been referred to as the ‘world’s biggest market failure’ (Reference SternStern, 2006). Consequently, the understanding of climate change as a market failure or an externality (in this book the term externality will be used) has been influential among economic institutions, including finance ministries (Reference SkovgaardSkovgaard, 2012, Reference Skovgaard2017b). Such a framing has implications for the policy solutions that are proposed (Reference Schön and ReinSchön and Rein, 1994). The framing consists of characterising a given situation or policy issue as well as defining what one ought to do in light of this characterisation, thus having a cognitive as well as a normative dimension (see Chapter 2 for a discussion of the distinction between cognitive and normative ideas and frames). Frames, in this case economic frames, are grounded in the institutions and actors that sponsor them (Reference Schön and ReinSchön and Rein, 1994). Hence, economic actors will not only be more likely to address issues framed in an economic way, but once they have adopted such a framing, they may promote this frame and address the issue in ways that differ from and may conflict with other ways of addressing it. Importantly, economisation entails economic actors defining an issue as economic and hence belonging to their portfolio, unlike issues they may address although they still recognise the issues as belonging to the portfolios of other actors. As an example, finance ministries are constantly involved in budgetary allocations in policy areas belonging to the portfolios of other ministries, while never disputing that these policy areas belong to the other ministries.

In mainstream economics, pricing the externality of climate change in the shape of carbon taxes and emissions trading is defined as the logical solution (Reference Grubb, Hourcade and NeuhoffGrubb et al., 2014; Reference RabeRabe, 2018; Reference Stern, Jotzo and DobesStern et al., 2013), while other economic instruments (fossil fuel subsidy reform, redirecting investment, market-based instruments generally speaking) are treated as second-best solutions when carbon pricing is not possible. Inherent to the framing is not only a way of defining the problem and how it should be addressed, but also a particular way of attributing value to outcomes, namely in monetary terms (Reference PearcePearce, 1993). Costs and benefits are all measured in terms of economic impact, including so-called ‘non-market’ losses such as the loss of human lives and species becoming extinct (for criticisms of this approach, see Reference Getzner, Spash and StaglGetzner et al., 2004; Reference SpashSpash, 2007; Reference StormStorm, 2017). Such measurements allow for comparisons – in monetary terms – between the consequences of climate change and of different policy options put into place to mitigate it. The costs of climate change are also referred to as the social cost of carbon and measured in the costs to society of one ton of CO₂.

In terms of objectives, (mainstream) environmental economics serves as an expression of neoclassical economics (and more fundamentally neoliberal ideology) that seeks to maximise economic growth (Reference Katz-Rosene and PatersonKatz-Rosene and Paterson, 2018). Environmental protection is important because it avoids the (long-term and societal) costs to economic growth resulting from environmental degradation, even if such protection may cause short-term economic loss to those subject to the protection measures (Reference NordhausNordhaus, 2008, Reference Nordhaus2019; Reference SolowSolow, 1974). Importantly, according to this approach, it is undesirable to adopt environmental protection if the (present value) costs of the protection exceeds the (present value) benefits of avoiding environmental degradation. Within mainstream environmental economics, much debate has hinged on how much the future costs of climate change should be discounted, a high discount rate leading to a lower social cost of carbon and hence recommendations of lower carbon prices (see the discussion among Reference NordhausNordhaus [2007], Reference WeitzmanWeitzman [2007] and Reference SternStern [2006] for an example of such a debate regarding discount rates and their implications for current action).

Economisation can take place at the international or domestic level. Economisation at the domestic level involves finance ministries, central banks, economic think tanks and university departments and other actors addressing economic policy with the aim of maximising economic welfare. At the international level, it involves economic institutions such as the ones involved here as well as individuals (e.g. Nobel Memorial Prize laureates in Economics). Importantly, private companies and associations of such companies are not seen as economic institutions in this respect, since their objective is to maximise their profits rather than the economic welfare of society (national or global). Importantly, the focus here is on economic policy broadly speaking, rather than on all economic activities. Thus, this book focuses on actors, which are political in nature and address economic issues, rather than on market actors and other actors engaged in economic activity in order to obtain economic gains.

Two qualifications are important to bear in mind. First, the story of economisation is not necessarily a story of paradigmatic change to the output of economic institutions and actors. While the economisation of climate change may have increased in scope and political importance, how far it has become central to the activities of economic institutions and actors remains an open question.

Second and on a more complex note, since the discipline of economics is not monolithic in its treatment of environmental issues, economisation does not entail one distinct way of framing climate change. Yet, including heterodox economic approaches to environmental issues such as ecological economics, evolutionary economics and limits to growth approaches (see e.g. Reference Berr and SpashBerr, 2017; Reference Meadows, Meadows, Randers and BehrensMeadows et al., 1972; Reference Mulder and Van Den BerghMulder and Van Den Bergh, 2001) under the concept of economisation would broaden it to a degree that would severely reduce its usefulness and academic relevance. Rather, the focus here is on mainstream economic approaches to environmental problems, since they – despite internal differences – share central tenets (including a focus on prices and equilibria) which have dominated the discipline of economics and economic policymaking. Moreover, most of the key tenets of mainstream economics are unique to economics (e.g. the focus on markets and prices), whereas much of the heterodox environmental economics share key tenets (e.g. power inequalities or ecological boundaries) with other disciplines. Specifically, I define mainstream approaches as being distinguished by an emphasis on efficiency (understood as maximum utility) while leaving questions of equity to other disciplines (Reference StormStorm, 2017).

While it is difficult to exactly delineate mainstream economics, the core of mainstream economics has for the last century consisted of neoclassical economics and the theoretical strands and schools drawing on it. Neoclassical economics is broadly understood as economic approaches based on markets and equilibria between opposing forces (e.g. supply and demand as reflected in the market price) being central concepts and on methodological individualism (Reference Vroey and PensierosoVroey and Pensieroso, 2016). A range of (mainstream) economic strands have drawn on neoclassical approaches, including the so-called neoclassical synthesis, monetarism, classical economics, new Keynesian and the so-called ‘New Synthesis’, in some cases without being considered as belonging to the neoclassical economics approaches (Reference HibbenHibben, 2016; Reference Vroey and PensierosoVroey and Pensieroso, 2016). These approaches can be placed along a continuum based on how they conceive the role of the state vis-à-vis the market, with neoclassical approaches arguing for minimal state intervention and Keynesian approaches for direct state interventions in the market (Reference StormStorm, 2017). I include all these approaches under the term of economisation, while arguing that it is important to identify the degree to which the economisation draws on purely neoclassical approaches or more Keynesian approaches. Given the predominant role of neoclassical economics within the discipline of economics, I argue neoclassical economisation is a more ideal-typical kind of economisation.

The theoretical fragmentation characterising economics on a general theoretical level is mirrored on the level of mainstream environmental economics (and even more so if one moves beyond the mainstream). Mainstream environmental economics includes differing approaches (Reference Stern, Jotzo and DobesStern et al., 2013), most importantly regarding the role of government. While adherents of Arthur C. Reference PigouPigou (1932) argue in favour of a carbon tax enforced by government and imposing the full costs of climate change on the polluter, adherents of Reference CoaseRonald A. Coase (1960) argue in favour of distributing tradable rights to pollute. Thus, Pigouvian carbon markets are based on a greater belief in government regulation than Coasean emissions trading systems, with Coase’s criticism of Pigou centred on the transaction costs of government intervention. This is not surprising, considering that Pigou was inspired inter alia by the Keynesian efforts to address market failures, and Coase was a member of the Chicago School (Reference Katz-Rosene and PatersonKatz-Rosene and Paterson, 2018). Yet, both approaches share a significant number of premises, including the key emphasis on addressing externalities, the objective of maximising economic welfare in society (Pigou is considered to be the ‘father of welfare economics’) and the belief in leaving the key decisions to the market (Reference Aslanbeigui and MedemaAslanbeigui and Medema, 1998). Hence, Pigou and Pigouvian environmental economics are best understood as neoclassical economists, although envisioning a slightly larger role for the state than Coase and his adherents.

Importantly, the belief in leaving key decisions to the market sets Pigou and Coase’s carbon pricing approaches apart from so-called regulatory approaches which impose non-tradable obligations on companies or subsidise green technologies. Hence regulatory approaches leave the decisions of how to reduce pollution or who should do it to the government rather than the market, an approach at odds with neoclassical economics but inspired by traditional Keynesianism (Reference Lauber and SchennerLauber and Schenner, 2011). Regulatory approaches in the shape of Keynesian (or Schumpeterian) green growth or green deal policies aimed at mitigating climate change and stimulating growth have become increasingly popular following the 2008–9 economic and financial crisis (Reference Meckling and AllanMeckling and Allan, 2020; Reference SkovgaardSkovgaard, 2013). While regulatory and green growth policies are not necessarily identical (it is possible to promote regulatory policies without adhering to green growth and vice versa), they share a belief in industrial policy in which a range of decisions are left to policymakers rather than the market, and that such policies can enhance growth (Reference JacobsJacobs, 2012). Yet, promotion of regulatory approaches will be treated as instances of economisation only if they involve other economic framings – such as a Keynesian focus on green growth. This is because while regulatory approaches may be promoted for economic (mainly Keynesian) reasons, they may also be promoted for other reasons (e.g. to address an environmental problem for non-economic reasons, as discussed later in this section).

In practice, Pigouvian carbon taxes have generally been promoted by economic actors together with Coasean emissions trading (Reference Katz-Rosene and PatersonKatz-Rosene and Paterson, 2018), increasingly under the heading of carbon pricing (Reference Skovgaard, Canavan, Zelli, Bäckstrand, Nasiritousi, Skovgaard and WiderbergSkovgaard and Canavan, 2020). Generally speaking, the mainstream approaches to climate change and climate policy studied here always favour policies that work through providing economic incentives and leaving as many decisions as possible to the market (Reference Grubb, Hourcade and NeuhoffGrubb et al., 2014, chapters 6–8). For instance, Reference NordhausNordhaus (2008) argues that for a problem such as climate change characterised by non-linear costs and linear benefits, taxes are preferable in economic terms, while the trading of allowances is preferable as regards linear costs and non-linear benefits. Yet, given the political obstacles to carbon taxes, he argues that a hybrid system of emissions trading with auctioning may be the best solution when considering both theoretical economic and concrete political factors (Reference NordhausNordhaus, 2008).

Another, increasingly important, strand of mainstream economics addressing environmental issues consists of the literature addressing green, climate and sustainable private finance and investment (Reference Barnett, Brock and HansenBarnett et al., 2020; Reference Campiglio, Dafermos, Monnin, Ryan-Collins, Schotten and TanakaCampiglio et al., 2018). This literature focuses less on the nature of climate change as an environmental problem and more on directing finance and investment to ensure the transition to a climate-friendly low-carbon society, especially the role of risk and uncertainty in affecting such investments. Such (perceived and real) risks are relevant both to investment in green technologies and in fossil fuels (thus concerning mitigation) and to investments that may be affected by climate change and other environmental degradation (Reference Campiglio, Dafermos, Monnin, Ryan-Collins, Schotten and TanakaCampiglio et al., 2018). This literature is rooted in the study of finance and institutional economics rather than environmental economics and economic theory (Reference Grubb, Hourcade and NeuhoffGrubb et al., 2014; Reference Hong, Karolyi and ScheinkmanHong et al., 2020). The focus is on overcoming barriers to climate friendly and sustainable investment, and while carbon pricing is defined as an important factor in this, other instruments such as green bonds, certificates and carbon disclosure requirements may be as important or more so.

Beyond economisation in the shape of framing climate issues in terms of environmental economics and other subdisciplines of mainstream economics, there are also other, less ideal-typical kinds of economisation based on other economic but non-academic framings. For instance, it is possible to focus on the fiscal consequences of fossil fuel subsidies or climate finance and define them as belonging to the portfolio of economic institutions (Reference SkovgaardSkovgaard, 2012, Reference Skovgaard2015, Reference Skovgaard2017a, Reference Skovgaard2017b) without drawing on environmental economics. Thus, these less ideal-typical cases of economisation define a climate issue as belonging to the portfolios of economic institutions because of the economic features ascribed to it, but are not necessarily predicated on the understanding of environmental problems constituting economic problems, and do not necessarily take environmental damage into concern. Beyond the economic framings, climate change may also be framed in purely non-economic terms, that is, without defining the damage caused in economic terms, but rather in terms of impact on social justice or on the intrinsic value of environmental diversity (Reference Clapp and DauvergneClapp and Dauvergne, 2011).

1.1.2 Economisation and Other ‘Ations’: A Question of Framing and the Actors Involved

The emphasis on agency in the shape of economic actors and institutions addressing the issue, rather than solely on how the issue is addressed, distinguishes economisation from previous uses of the term economisation (see e.g. Reference BinaBina, 2013; Reference Çalışkan and CallonÇalışkan and Callon, 2009, Reference Çalışkan and Callon2010; Reference Schimank and VolkmannSchimank and Volkmann, 2012; Reference WenzlaffWenzlaff, 2019). These previous studies of economisation have focused on processes that constitute particular ‘behaviours, organizations, institutions and, more generally, the objects in a particular society … as “economic’’’ (Reference Çalışkan and CallonÇalışkan and Callon, 2009). Scholars studying economisation in this sense mainly come from sociology, and have drawn on the description of how economic logics colonise non-economic spheres of social life going back to Karl Marx and Manfred Weber (Reference Jessop, Schimank and VolkmannJessop, 2012; Reference WenzlaffWenzlaff, 2019). In spite of the historical roots of the concept, it is often used to describe contemporary processes tied to the spread of neoliberalism (Reference BinaBina, 2013; Reference MavelliMavelli, 2018). Furthermore, the concept is often used in terms almost synonymous with marketisation, in the sense of the adoption of market logics within non-market social spheres. Marketisation – a concept originating in the political economy and business administration literature – takes place inter alia through creating markets for pollution and ecosystem services (Reference McCormackMcCormack, 2017). While economisation (in the sense used in this book) may lead to marketisation, it differs from marketisation in that it also encompasses ways of addressing issues that do not involve the creation of markets, for example, through taxes, investment, subsidies, and so forth.

Studies on economisation have focused on the economisation of fields or spheres such as education, health and science (Reference Schimank and VolkmannSchimank and Volkmann, 2012), with relatively few studies using the term economisation when studying the employment of economic logics within the spheres of energy or environmental protection (but see Reference Alvial-Palavicino and UretaAlvial-Palavicino and Ureta, 2017; Reference BinaBina, 2013; Reference Wilshusen and MacDonaldWilshusen and MacDonald, 2017).

Economisation in this, more purely discursive and structural, understanding describes developments towards treating issues in economic terms, a treatment that in the case of environmental politics has also been described in terms of the paradigms or norm complexes of ‘market liberalism’ (Reference Clapp and DauvergneClapp and Dauvergne, 2011) and ‘liberal environmentalism’ (Reference BernsteinBernstein, 2001). Both market liberalism and liberal environmentalism describe ways of reconciling economic and environmental objectives in a way that is predicated on economic core tenets (see also Reference NewellNewell, 2012; Reference Newell and PatersonNewell and Paterson, 2010), similarly to the economisation of climate change. Yet, they focus mainly on such reconciliation within environmental institutions and actors (e.g. the 1992 Earth Summit; see Reference BernsteinBernstein, 2001), unlike economisation in the sense used here, in which the involvement of economic actors and institutions is inherent to the concept of economisation. Furthermore, both market liberalism and liberal environmentalism are paradigms or norm complexes, while economisation describes a dynamic including the involvement of a particular set of actors and is more specific in terms of relying on approaches from (environmental) economics. Thus, there are a range of studies of how sustainable development and environmental protection have been addressed in economic ways, which have focused on the discursive and framing-oriented aspects of economisation, and not treated the involvement of economic actors as an equally important aspect of economisation.

The present approach to economisation also differs from the concepts of politicisation and depoliticisation, which focus on the processes and strategies moving issues into the field of politics (Reference ZürnZürn, 2014) or out of it (Reference BurnhamBurnham, 2001; Reference HayHay, 2007). Thus, politicisation and depoliticisation do not include particular framings of the issue in question (e.g. regarding its nature, how it should be addressed) beyond the basic question of whether it constitutes a political issue or not. The political field is characterised by public communication about and contestation over collectively binding decisions concerning the common good (Reference ZürnZürn, 2014). Conversely, depoliticisation consists of moving issues away from such public contestation and communication, for example, by moving them from parliamentary or government bodies to technocratic ones, as has been the case with central banks which were freed from political control in the 1990s (Reference Marcussen, Dyson and MarcussenMarcussen, 2009). While the depoliticisation literature has its roots in political economy and generally argues that we have witnessed a depoliticisation of (especially economic) policymaking in the past three decades, the politicisation literature has inter alia argued that we are witnessing an increasing politicisation of international institutions (Reference ZürnZürn, 2014). Arguably, economisation may constitute a type of (neoliberal) depoliticisation provided that the issue in question was previously politicised, but not framed as an economic issue (Reference Madra and AdamanMadra and Adaman, 2014), as Reference FelliRomain Felli (2015) has argued emissions trading has done to environmental policymaking. However, moving an issue from one kind of depoliticised policymaking into the economic field does not amount to depoliticisation.

Economisation in the sense used in this book shares fewer similarities with (de)politicisation and economisation in a discursive sense than with concepts such as climatisation and securitisation, which all include framing issues in particular ways as well as them being addressed by particular actors or policy spheres. The focus on particular actors means there is a stronger emphasis on agency than in the purely discursive versions of economisation. Climatisation, as defined by Reference Aykut, Castro, Aykut, Foyer and MorenaAykut and Castro (2017), consists of ‘attempts to frame questions … as issues of climate policy, and attempts to enable the climate regime to tackle those questions within its own organisational routines’. The opposite of climatisation is declimatisation, or the ‘counter-strategies and institutional dynamics that conspire to maintain existing separations between climate governance and fossil fuel regulation’ (Reference Aykut, Castro, Aykut, Foyer and MorenaAykut and Castro, 2017). While economisation focuses on treating climate change as an economic issue and climatisation focuses on treating issues such as fossil fuel use as a climate issue, they share an attention on framing as well as on the procedures and policymaking spheres of actors. Climatisation and its framing of climate change as a global environmental problem shares similarities with economisation and its framing of climate change as a global externality, but differs in that the former leads to policy instruments mitigating rather than pricing emissions as their ultimate end, and particularly to addressing climate change within a distinct climate regime rather than economic institutions.

Securitisation, or treating an issue as an existential security threat (Reference Buzan, Wæver and WildeBuzan et al., 1998), also focuses on the framing of the issue as well as the consequences of the framing in terms of policymaking. Securitisation entails that an issue constitutes a threat to the existence of an entity, and hence has to be addressed beyond the normal political logic of weighing priorities against each other (Reference Buzan, Wæver and WildeBuzan et al., 1998).Footnote ³ Furthermore, the concept of securitisation differs from economisation in that it focuses on the discursive elements of an issue being defined as a threat through a speech act and the subsequent acceptance of the claim by an audience, unlike the concept of economisation, which focuses on framing and the issue being brought into a policy field. While the possibilities for securitising climate change have earlier been the subject of speculation, especially in connection with the 2007 discussion of climate change in the UN Security Council in the past ten years the economic framing of climate change have been far more prominent (see Reference AykutAykut, 2016; Reference Katz-Rosene and PatersonKatz-Rosene and Paterson, 2018).

Finally, financialisation refers to a development in which financial motives, markets, actors and institutions play an increasing role in the operation of domestic and international economies (Reference Epstein and EpsteinEpstein, 2005). This process differs from economisation as described in this book in that it portrays a process within the economic sphere rather than within non-economic spheres.

To summarise, what I refer to as the first aspect of economisation involves moving an issue into the economic field, and thus allowing it to be addressed by institutions and actors dealing with economic policy issues at both the domestic and international levels. Hence, economic institutions treat climate change as an issue that belongs to their portfolio because of the economic features ascribed to it, rather than belonging to the portfolio of other institutions although it is still relevant to them because it also affects economic objectives. These economic institutions are characterised not only by their economic worldview rooted in mainstream economics (Reference ChwierothChwieroth, 2008; Reference KingdonKingdon, 2003; Reference WildavskyWildavsky, 1986; Reference WoodsWoods, 2006) but also by their relative power compared to domestic (e.g. environment ministries) and international environmental institutions (e.g. the UNFCCC). Hence, economisation in terms of the involvement of economic institutions has significant transformational potential. Besides involving a preference for economic policy instruments as well as institutions more powerful than environmental ones, the activities of economic institutions cut across a wider range of policy areas than environmental policymaking. This is important, as action on climate change that is not siloed but involves the integration of climate policy objectives into wider policymaking can increase policy impact (Reference Adelle and RusselAdelle and Russel, 2013; Reference Jordan and LenschowJordan and Lenschow, 2010; Reference Nilsson and PallemaertsNilsson and Pallemaerts, 2009; Reference Nilsson, Zamparutti, Petersen, Nykvist, Rudberg and McGuinnNilsson et al., 2012).

On the whole, the outcomes of economisation are not pregiven. Besides the fact outlined in this section that the economic framings of climate change may differ, the economic institutions also differ in terms of their worldview, relations with other actors and the role of individual entrepreneurs in the institutions studied (see also Chapter 2). These factors may shape how they frame climate change issues as economic problems. For instance, their worldview may influence the economic framing of climate change the institution adopts. Furthermore, different issues may be economised in differing ways, depending inter alia on their characteristics (particularly economic consequences). For instance, fossil fuel subsidy reform (which has a positive impact on fiscal balances) may be addressed in a different way than climate finance (which has a negative fiscal impact on the countries providing the finance), as discussed in Section 1.5. Rather, it is important to explore how the important dynamic of economisation unfolds in practice, including the causes and consequences of this dynamic.

1.3.1 Global Climate Governance

The present volume is indebted to a range of different literatures. Starting with the broadest bodies of literature, the literature on global climate governance (Reference Bernstein and HoffmannBernstein and Hoffmann, 2019; Reference Biermann and KimBiermann and Kim, 2020; Reference Jordan, Huitema, van Asselt and ForsterJordan et al., 2018; Reference Keohane and VictorKeohane and Victor, 2016) provides important context for this book, namely studying how the three institutions have addressed climate issues and thus been part of global climate governance. As mentioned at the beginning of this chapter, Reference VictorDavid Victor (2011) has pointed out that most of the decisions affecting the climate are made outside the environmental policymaking domain, which is detrimental to the response to climate change. This book addresses this problematique by exploring it at the international level, where it plays out without the constraints of domestic politics and has potentially far-reaching consequences for a range of countries. In doing so, it also draws on the literature on the institutional complexity or polycentricity of global climate governance (for institutional complexity see Reference Biermann, Pattberg, van Asselt and ZelliBiermann et al., 2009a; Reference Keohane and VictorKeohane and Victor, 2011; for polycentricity see Reference Jordan, Huitema, van Asselt and ForsterJordan et al., 2018; Reference OstromOstrom, 2010). This literature has described the global governance of climate change in terms of a range of institutions addressing climate change while interacting in various ways. Although the UNFCCC occupies a central place within this complex, institutions such as the World Trade Organization, the Montreal Protocol, hybrid and non-state initiatives like the Forestry Stewardship Council also constitute elements of the system. Central to this literature is the notion that the role of individual institutions cannot be understood in isolation, but that studying their roles includes studying the effect of other institutions on them as well as their effect on other institutions. This book addresses an aspect of such complexity by studying three institutions that are part of this complex and inter alia studying their role within the complex and their interactions.

Much of the institutional complexity or polycentricity literature originates from studies of climate governance but is relevant to wider studies of international institutions. Thus, in yet more general terms, the book draws on literature on the factors influencing institutional output, as well as the output’s influence on other international institutions and at the domestic level. Regarding the former, the analytical framework of the book (outlined in Chapter 2) draws – beyond the previously mentioned theories of institutional interaction and complexity – on theories explaining institutional output in terms of IO bureaucracies (e.g. Reference Barnett and FinnemoreBarnett and Finnemore, 2004) and relations with member states, including principal–agent theory (Reference Nielson and TierneyNielson and Tierney, 2003). Furthermore, regarding the consequences of the institutional output, the framework distinguishes between the domestic and international consequences (see also Reference YoungYoung, 2001). Concerning the domestic level, the framework draws on literature on how institutional output may affect ideational or incentive-based dynamics (e.g. Reference CheckelCheckel, 2005; Reference KahlerKahler, 2000) as well as literature on the policy process (e.g. Reference KingdonKingdon, 2003; Reference Sabatier and WeibleSabatier and Weible, 2014). Regarding the international level, the framework draws on literature on the dyadic interaction between institutions (Reference Oberthür and StokkeOberthür and Stokke, 2011; Reference StokkeStokke, 2001, Reference Stokke2012) and IOs (Reference BiermannBiermann, 2008; Reference KrankeKranke, 2020; Reference HibbenMomani and Hibben, 2015), and on the previously mentioned polycentricity/institutional complex literature (Reference Biermann, Pattberg, van Asselt and ZelliBiermann et al., 2009a; Reference Jordan, Huitema, van Asselt and ForsterJordan et al., 2018; Reference Keohane and VictorKeohane and Victor, 2011). A common theme of the framework is that the causal mechanisms through which the institutions are influenced may be of an ideational (normative dynamics or cognitive) character as well as involving changes to the incentive structures facing actors.

1.3.2 Environmental–Economic Relations

The present book also relies on literature on environmental–economic relations (Reference EkinsEkins, 2000; Reference Grubb, Hourcade and NeuhoffGrubb et al., 2014; Reference Katz-Rosene and PatersonKatz-Rosene and Paterson, 2018; Reference Newell and PatersonNewell and Paterson, 2010; Reference StevensonStevenson, 2019). As should be evident from the preceding discussion of the concept of economisation, this concept is greatly indebted to this literature, as it describes one way of reconciling economic and environmental objectives by framing an environmental problem as an economic one. One relevant strand of the literature on environmental–economic relations explores whether economic and environmental objectives are framed as synergistic or conflictive, finding that the framing of the objectives as conflicting would lead to the prevalence of economic objectives (Reference Hoffman and VentrescaHoffman and Ventresca, 1999; Reference JacobsJacobs, 2012; Reference SkovgaardSkovgaard, 2014). Another key strand within this literature concerns the role of (especially international) economic institutions in maintaining policy paradigms based on markets and economic growth (Reference BernsteinBernstein, 2001; Reference DauvergneDauvergne, 2016). According to the literature on economic–environmental relations, environmental policymaking predicated on economic principles has been prominent inter alia because of support from powerful economic actors and resonance with economic discourse (Reference BernsteinBernstein, 2001; Reference NewellNewell, 2012; Reference Newell and PatersonNewell and Paterson, 2010). At the same time, such policymaking predicated on economic principles has often led to policy responses that prioritise economic efficiency over justice concerns and which do not constitute a radical departure from existing policy paradigms.

1.3.3 Fossil Fuel Subsidies and Climate Finance

In a more empirical vein, the book draws on the literature on climate finance and fossil fuel subsidies, particularly the political aspects of these issues. The literature on fossil fuel subsidies (see Chapter 4 for more detail) has mainly focused on technical and economic aspects, although the political aspects have been developed more recently (see for instance the contributions to Reference Inchauste and VictorInchauste and Victor, 2017; Reference Skovgaard and van AsseltSkovgaard and van Asselt, 2018b; Reference van Asselt and Van de Graafvan Asselt and Van de Graaf, 2017). Although much of this literature focuses on the domestic politics of fossil fuel subsidies (see e.g. Reference OverlandOverland, 2010; Reference RentschlerRentschler, 2018; Reference Rentschler and BazilianRentschler and Bazilian, 2017b), the global attempts to address fossil fuel subsidies, including the role of the norm of fossil fuel subsidy reform (Reference Van de Graaf, Blondeel, Skovgaard and van AsseltVan de Graaf and Blondeel, 2018), have been the subject of studies focusing inter alia on the G20, the IMF and the OECD (Reference SkovgaardSkovgaard, 2017a, 2018). The literature on climate finance, including on the political aspects, has a longer track record (see e.g. Reference Keohane and LevyKeohane and Levy, 1996), and a stronger emphasis on the international level (Reference HaitesHaites, 2013; Reference Skovgaard, Pickering and BetzoldSkovgaard et al., 2017; see also Chapter 9). This difference in emphasis on the international level is perhaps not surprising, given that fossil fuel subsidies are domestic policies, whereas climate finance (understood as financial flows from developed to developing countries) are international in nature. The international governance of climate finance has been the subject of studies that have focused on the climate system (Reference Pickering, Betzold and SkovgaardPickering et al., 2017), individual institutions such as the Green Climate Fund (Reference Abbott and GartnerAbbott and Gartner, 2011), how to determine whether climate finance commitments are being met (Reference PauwPauw, 2017; Reference Roberts and WeikmansRoberts and Weikmans, 2017; Reference Weikmans, van Asselt and RobertsWeikmans et al., 2020), as well as which normative ideas should guide the generation and allocation of climate finance (Reference Ciplet, Roberts and KhanCiplet et al., 2013; Reference MooreMoore, 2012; Reference Stadelmann, Persson, Ratajczak-Juszko and MichaelowaStadelmann et al., 2014).

1.3.4 The International Economic Institutions

The book also draws on the literature on the three institutions studied for empirical knowledge (see also Chapter 3). Given their nature as economic institutions, it is perhaps not surprising that much of the literature has focused on their role regarding economic governance (see Reference BabbBabb, 2013; Reference ChwierothChwieroth, 2008, Reference Chwieroth2010; Reference WoodsWoods, 2006 regarding the IMF; Reference Carroll and KellowCarroll and Kellow, 2011 regarding the OECD; Reference Cooper and ThakurCooper and Thakur, 2013; Reference SlaughterSlaughter, 2015 regarding the G20). The IMF literature has outlined the significant power of the institution to influence national policymaking, especially in countries under IMF programmes, owing to these countries receiving financial assistance (Reference Kentikelenis, Stubbs and KingKentikelenis et al., 2016; Reference Pop-ElechesPop-Eleches, 2009). The IMF’s role regarding environmental policy has been subject to much less attention, inter alia because of the Fund’s limited interest in the topic and its emphasis on economic growth at the expense of environmental protection (Reference HarveyHarvey, 2005; Reference Lindenthal and KochLindenthal and Koch, 2013; Reference PolakPolak, 1991). The G20 literature has focused on the role of the institution as a global steering committee (Reference CooperCooper, 2010; Reference Held and YoungHeld and Young, 2013) consisting of twenty of the world’s largest economies and covering 85 per cent of global GDP. Although the role as a steering committee has been most pronounced regarding economic policy, especially in the response to the 2008–9 global economic and financial crisis, its role regarding environmental policy has also been significant (Reference Kirton and KokotsisKirton and Kokotsis, 2015; Reference SlaughterSlaughter, 2017). The G20’s role in environmental governance has in particular been studied with regard to greening the fiscal stimulus following the 2008–9 economic and financial crisis (Reference BarbierBarbier, 2010; Reference KleinKlein, 2019, Reference Meckling and AllanMeckling and Allan, 2020; Reference TienhaaraTienhaara, 2016). Finally, the OECD has, arguably because of its more limited influence within global governance, been the subject of fewer studies (but see Reference Carroll and KellowCarroll and Kellow, 2011). Given that the OECD covers a wider range of policies in its day-to-day practices (albeit from an economic perspective), much of this literature has focused on the impact of the OECD on governance within fields such as education (Reference Niemann and MartensNiemann and Martens, 2018) and environment (Reference Busch, Biermann and SiebenhünerBusch, 2009). The OECD’s economic approach to environmental issues has been characterised as ‘liberal environmentalism’, a normative compromise between environmental protection and economic growth that predicates international environmental protection on the promotion and maintenance of a liberal economic order (Reference BernsteinBernstein, 2001).

1.5.1 International Economic Institutions

The economisation of climate change at the international level has taken place within a range of economic institutions, from the newly founded Coalition of Finance Ministers for Climate Action to the World Trade Organization (WTO), and covers a range of topics from climate change in general to climate insurance. The three institutions have been chosen on the basis of their individual importance in international economic governance and the variation that they represent (see also Chapter 3 for more detail on their similarities and differences). The IMF has played an important role in promoting the Washington Consensus and neoclassical economic policies (Reference BabbBabb, 2013; Reference Momani and HibbenMomani and Hibben, 2018), the G20 was crucial in addressing the 2008–9 global economic and financial crisis (Reference DreznerDrezner, 2014) and the OECD has shaped the knowledge basis for policies addressing inter alia education, environment and development (Reference Carroll and KellowCarroll and Kellow, 2011). Furthermore, all three institutions have economic growth and stability as main objective, while covering a range of issues, unlike other institutions such as the World Bank (which has development as its objective) or the WTO (which has a narrow focus on trade).

While sharing the fundamental characteristic of being economic institutions, the three institutions also represent a variation on theoretically relevant variables that may influence their output (see Chapter 2), allowing for a comparative exploration of their influence beyond the process-tracing of the individual case studies. First, they differ in membership, with the G20 covering twenty of the world’s largest economies, the OECD all developed countries and the IMF virtually all countries in the world. Second, they also differ in their decision-making processes, with the G20 and the OECD using consensus-based procedures to reach agreements among the member states and the IMF using voting based on countries’ financial contributions to the IMF, a system that grants the major developed countries a position close to a combined veto power. Third, the fact that the IMF and OECD have international bureaucracies, and the G20 does not, allows for a comparison of the influence of such bureaucracies. Fourth, the IMF and the OECD differ in the degree of autonomy their bureaucracies enjoy vis-à-vis the member states, with the IMF being significantly more autonomous. Fifth, the institutions differ in the governance functions they perform. Whereas the G20 is a political forum for debating and agreeing on how states should address political issues, the OECD is a knowledge provider that analyses and evaluates member state policies and the IMF is an operational institution that can pursue policies independently of member states.

1.5.2 The Policy Issues

The policy issues of fossil fuel subsidies and climate finance are also characterised by similarities and differences (see Chapters 4 and 9). Both offer very clear-cut cases of economisation and are relatively new arrivals to international climate politics (fossil fuel subsidies having been introduced more recently than climate finance), having rapidly increased in importance within the last decade. These characteristics distinguish these issues from issues such as adaptation, mitigation (understood in a broad sense) or renewable energy, which have been much less economised, and which have been part of international climate politics for longer, making it more difficult to identify the consequences of economisation on these issues. Unlike issues such as adaptation, mitigation and renewable energy, the two issues are both defined in terms of their relevance to climate change policy (climate finance and fossil fuel subsidies) and to economic policy (climate finance and fossil fuel subsidies).

In both cases, the practices now defined as constituting fossil fuel subsidies (and their reform) and climate finance took place long before the two concepts emerged. Subsidies have been provided to the consumption and production of fossil fuels since at least the end of the Second World War (Reference SteenblikSteenblik, 1999), and the financing of projects that mitigate climate change in developing countries, for example, renewable energy, also dates back decades (Reference Michaelowa and MichaelowaMichaelowa and Michaelowa, 2011b). Yet, the concept of energy subsidies only date back to the 1980s (World Bank, 1983), and fossil fuel subsidies to the 1990s (Reference Larsen and ShahLarsen and Shah, 1992). Likewise, the concept of climate finance emerged only following the 1992 Earth Summit. On a closely related note, both issues have been characterised by heated debate regarding what exactly can be defined as fossil fuel subsidies (Reference Koplow, Skovgaard and van AsseltKoplow, 2018; Reference Skovgaard and van AsseltSkovgaard and van Asselt, 2019; see also Chapter 4) and climate finance (Reference Roberts and WeikmansRoberts and Weikmans, 2017; see also Chapter 9). Such definitional contestation has resulted in estimates of their global volume that range from 300 to 5,000 billion in the case of fossil fuel subsidies (Reference Coady, Parry, Le and ShangCoady et al., 2019; IEA, 2019) and from 2.2 to hundreds of billions in the case of climate finance (Reference DasguptaDasgupta and Climate Finance Unit, 2015; UNFCCC Standing Committee on Finance, 2018). The size of (most of) these estimates points to the economic importance of both issues. For comparison, the GDP of Indonesia was USD 1,000 billion in 2018; and that of the UK was 2,900 (World Bank, 2020c). Although the estimated economic impact of temperature increases of 3–4 degrees lies in the range of 2–15 per cent of GDPFootnote ⁶ (Reference Kahn, Mohaddes, Ng, Pesaran, Raissi and YangKahn et al., 2019) and is thus much greater, the reform of fossil fuel subsidies and the provision of adequate climate finance are crucial for the mitigation of climate change (Reference Gupta, Harnisch, Barua, Edenhofer, Pichs-Madruga and SokonaGupta et al., 2014; Reference Skovgaard and van AsseltSkovgaard and van Asselt, 2019).

Yet, the two issues also differ. First, regarding the nature of the issue addressed, they differ in their fiscal impact, with climate finance constituting expenditure for the countries providing it, whereas fossil fuel subsidy reform constitutes a way of reducing expenditure. Fossil fuel subsidy reform can be framed as a policy instrument that reduces emissions and saves public money and removes macroeconomic distortions, a triple-win situation that is attractive to finance ministries in particular, a key constituency of the three institutions. Climate finance does not allow for such resonance. Second, the international discussions of climate finance are characterised by political contestation between developed and developing countries to a much larger degree than the discussions of fossil fuel subsidies. This is because climate finance concerns the flow between these two groups of countries and fundamental issues of climate equity, whereas fossil fuel subsidies are primarily domestic phenomena. Arguably, mainly developing countries enjoy the benefits of climate finance (although developed countries also benefit from mitigation and from reduced refugee flows caused by adaptation finance) and the costs of climate finance fall on developed countries, whereas both the costs and benefits of fossil fuel subsidies are domestic (except for the impact on climate change). Third, climate finance was already an established issue by the time the three institutions started addressing it, unlike fossil fuel subsidies which were mainly put on international and domestic agendas by the G20’s commitment to reform them. Thus, regarding climate finance, the institutions were forced to navigate in a system in which other international institutions (particularly the UNFCCC) were already active. Fossil fuel subsidies were from the beginning an issue the economic institutions were able to address without encroaching on the turf of other institutions.

1.5.3 Illustrative Country Cases

To illustrate the domestic consequences of the output of the three institutions, I focus on five countries: Denmark, India, Indonesia, the United Kingdom and the United States. These countries have been selected based on their important roles in the international discussions of fossil fuel subsidy reform and climate finance, yet they vary in terms of experience of both issues. Regarding fossil fuel subsidies, while the United Kingdom and Denmark have been reluctant to acknowledge having fossil fuel subsidies, the other countries acknowledge their subsidies, but the extent to which the reform was successful ranges from very limited (the United States), to mixed (Indonesia pre-2014) and finally to high (India, Indonesia in recent years). Interestingly, while the United Kingdom and Denmark have actively promoted fossil fuel subsidy reform internationally, India has been outright sceptical of the international efforts regarding fossil fuel subsidy reforms. Concerning climate finance, all five countries have been very active in the international climate finance negotiations. Denmark, the United Kingdom and the United States are listed in the United Framework Convention on Climate Change’s Annex II (UNFCCC, 1992), which obliges them to provide climate finance, whereas India and Indonesia as developing countries are entitled to such finance. While the United Kingdom and Denmark provide relatively large volumes of climate finance per capita (about USD 30 per capita in 2015; UNFCCC Standing Committee on Finance, 2018) compared to other Annex II countries, the United States has provided much lower numbers even under the Obama administration (about USD 9 per capita in 2015; UNFCCC Standing Committee on Finance, 2018). Both Indonesia and India are among the top recipients of climate finance. In the United States, climate finance and other climate issues have been subject to considerable political contestation and radical policy changes from the Obama to the Trump administration, whereas the topic has been characterised by relative political consensus in Denmark and the United Kingdom. In the international climate finance negotiations, Denmark, Indonesia and the United Kingdom have generally sought to build bridges between developed and developing countries, whereas India and the United States have generally (also under the Obama administration) been among the hardliners in their respective country groupings. Finally, the countries cover both developed and emerging economies (but not Least Developed Countries because of their lesser share of global fossil fuel subsidies), and G20 members as well as one non-G20 member.