Problem stream

The problem stream contains the problems which are simultaneously discussed in the political system. But what constitutes a problem? A problem results from the gap between people’s perceptions of how things are and how they ought to be. While there are countless potential problems at any given time, only a few succeed in making it to the political agenda. This happens through indicators, focusing events, and feedback from existing programs (Kingdon Reference Kingdon1995, 90–115). In our case, two different kinds of indicators are crucial. Thus, while the case for carbon taxation is often made on environmental grounds, we emphasise that fiscal considerations must not be neglected. If a country does not meet its climate targets, “environmental pressure” rises to implement countermeasures such as carbon taxation. Similarly, if a country comes under severe fiscal pressure, the introduction of carbon taxes offers an attractive option to generate additional revenues, at least when compared with raising other taxes (Jagers and Hammar Reference Jagers and Hammar2009, 224–229; Schlegelmilch and Joas Reference Schlegelmilch and Joas2016). This argument is supported by previous studies which show that not only environmental but also fiscal considerations play an important role in the introduction of carbon taxes (Sterner Reference Sterner1994; Harrison Reference Harrison2010; Speck Reference Speck2013; Skovgaard et al. Reference Skovgaard, Ferrari and Knaggård2019). Consequently, we expect the problem stream to be ripe when environmental or fiscal pressure is high.

Political stream

The political stream focuses on the distribution of power within the political system but also within society. In Kingdon’s original analysis of political decisionmaking in the USA, this includes government ideology, organised interests as well as the “national mood” (Kingdon, Reference Kingdon1995, 145–164). Given that all countries covered by our analysis represent parliamentary systems, we follow Zahariadis (Reference Zahariadis2003) who argues that, with this system of government, government ideology is supposed to be the crucial factor in the political stream (see also Herweg et al. Reference Herweg, Zahariadis, Zohlnhöfer, Weible and Sabatier2018, 36–37). More precisely, we argue that it is the emphasis governing parties put on environmental issues that matters. Green parties and other green-minded parties in government are more likely to introduce carbon taxation than parties representing conventional growth ideologies (cf. Andersen Reference Andersen2019). Hence, we expect the political stream to be ripe when a green-minded government is in power.

Policy stream

The policy stream, also described by Kingdon as “the policy primeval soup”, contains the ideas that float around in the communities of policy experts. This stream thus contains policy options, such as the introduction of a carbon tax, which at some point might become the solutions to one of the problems present in the problem stream. To do so, proposals have to meet some ‘criteria of survival’, i.e. they must neither collide with organisational, technical, and legal restrictions (technical feasibility) nor with budget constraints (financial viability), and they have to be in line with general values dominant in the relevant policy community (value acceptability) (Kingdon Reference Kingdon1995, 116–144). Since carbon taxes do not generate financial costs but revenues and the implementation of those taxes is, as many countries have proven, technically feasible, the support by policy experts seems to be the main factor concerning the ripeness of the policy stream.

Policy windows

According to the MSF, policy change results from the successful coupling of the three streams. The precondition for a successful coupling is the opening of a policy window. Policy windows can either open in the problem stream or in the political stream. In the former case, focusing events or changes of indicators can steer attention to a problem and thus provide the opportunity to present fitting policy solutions. In the latter case, political changes such as changes of government can offer policy entrepreneurs an opportunity to advance new policy proposals (Kingdon Reference Kingdon1995, 173–175; Zahariadis Reference Zahariadis2003, 66–86). Given its crucial role in the MSF, a policy window in either of the two streams is a necessary condition for the coupling of the streams and policy change.

Policy entrepreneurs

While ripe streams and an open policy window are the conditions under which policy change becomes likely, policy entrepreneurs are the central actors in the coupling process (Kingdon Reference Kingdon1995, 179–183; Herweg et al. Reference Herweg, Zahariadis, Zohlnhöfer, Weible and Sabatier2018, 28–29). Policy entrepreneurs are actors who invest their resources in coupling the three streams in return for “anticipated future gains in form of material, purposive, or solidary benefits” (Kingdon Reference Kingdon1995, 179). The chances of success rise when policy entrepreneurs have direct access to policymakers or, even better, when they hold a leadership position within the government (Kingdon Reference Kingdon1995, 180–181; Herweg et al. Reference Herweg, Huß and Zohlnhöfer2015, 445–446). Hence, we argue that it is essential that a policy entrepreneur engages in coupling the streams and that the introduction of a carbon tax becomes more likely when a leading member of government, such as the prime minister or the minister of finance, serves as policy entrepreneur.

Operationalisation and calibration

The basis for our QCA is the translation of the MSF’s concepts into conditions (operationalisation) and the assignment of set membership scores to our cases for each condition (calibration). As Engler and Herweg (Reference Engler and Herweg2019, 906) point out, the operationalisation of the MSF is challenging, since there are no established indicators for the framework’s elements. However, existing studies that combine elements of the MSF with QCA offer hints at how to operationalise the different elements (Sager and Rielle Reference Sager and Rielle2013; Sager and Thomann Reference Sager and Thomann2017). Concerning the calibration, set membership is determined through theoretical and case-based knowledge. Here, the point of indifference (0.5) is of central importance. It determines under which circumstances a case is rather part of a subset (set value >0.5) or not (set value <0.5) (Schneider and Wagemann Reference Schneider and Wagemann2013, 32; Sager and Thomann Reference Sager and Thomann2017, 300). The operationalisation and calibration of conditions and outcomes are summarised in Table 2 and discussed in more detail in the following sections.

Table 2. Calibration of outcome and conditions

Note: QCA offers two options: Direct calibration uses anchor points and a logistic function to define set-values. Indirect calibration uses case knowledge and theoretical considerations to determine membership scores (Schneider and Wagemann Reference Schneider and Wagemann2013, 35).

Problem stream

In accordance with Sager and Thomann (Reference Sager and Thomann2017), we use quantitative indicators to determine the ripeness of the problem stream. As outlined above, the problem stream incorporates two elements, namely environmental and fiscal pressure. The environmental indicator covers the difference between the countries’ CO_2e-reduction targets based on the EU commitments and their actual CO_2e-emissions, because this is the most objective measure of ‘climate pressure’.Footnote ⁴ To calibrate the environmental indicator, we refer to the EU requirements that allow countries to carry forward up to 5% of their annual emissions to the following year. Hence, we assign a membership value greater than 0.5 if the difference between emissions targets and actual emissions exceeds 5%. A full membership (value of 1) is reached at a deviation of at least 10%, the overall EU reduction target till 2020. The second indicator measures the fiscal pressure based on the countries’ annual budget deficit. To decide on the urgency of budget consolidation, we refer to the European Stability and Growth Pact (SGP), which requires each member to limit the annual deficit to 3% of GDP. Therefore, countries with a deficit above this threshold receive a membership score greater than 0.5. Full membership is reached at a deficit of 9.94%, the mean deficit of countries that received support from the European Stability Mechanism during the European debt crisis.

Since legislative periods are used as units of observation, we follow Schmitt and Zohlnhöfer (Reference Schmitt and Zohlnhöfer2019) who point out that a government’s reform agenda is substantially shaped by the problems it faces at the beginning of its term. Hence, we focus on the mean difference between the proposed and actual emissions as well as the mean budget deficits for the first half of the legislative period.

Political stream

As outlined above, our focus in the political stream is on government ideology (cf. Engler and Herweg Reference Engler and Herweg2019, 908; Sager and Thomann Reference Sager and Thomann2017). The Manifesto Project provides data on parties’ emphasis on ‘environmental protection’, which can be used to calculate government values for this issue (Volkens et al. Reference Volkens, Krause, Lehmann, Matthieß, Merz, Regel and Weßels2019).Footnote ⁵ In the case of multi-party governments, parties’ emphasis on environmental protection is weighted according to their share of cabinet seats. Governments with values above the median value (3.41%) of all European parties are perceived as rather green-minded governments and thus receive a membership value greater than 0.5. Moreover, governments with a value of at least 12.43%, the median of European green parties, receive a membership value of 1.

Policy window

In general, policy windows can open either in the problem stream (problem window) or in the political stream (political window). To determine if a problem window was available, we rely on a qualitative calibration process taking different sources into account (see Table A2 and Table A3 in the Appendix). First, we reviewed the relevant country reports from the Political Data Yearbook of the European Journal of Political Research to determine whether climate change was an important issue in national politics. Second, we searched the International Disaster Database for climate-change related focusing events such as heat waves, wildfires, and droughts. To qualify as a focusing event, the disasters had to be classified as “significant disasters” by the Centre for Research on the Epidemiology of Disasters (CRED n.d.).Footnote ⁶ A problem window is supposed to be open when either climate change was an important issue in the legislative period and/or a focusing event occurred in this period.

Turning to political windows, we focus on changes in government (Engler and Herweg Reference Engler and Herweg2019, 909) and suggest that such windows either open when a green party participates in the government, thus increasing its impact on climate policy, or when the leaders of major parties emphasise the climate issue before forming the government. Our coding with regard to nongreen parties highlighting climate policy is again based on election reports from the Political Data Yearbook of the European Journal of Political Research (for a complete list of sources see Table A2 in the Appendix).

Descriptive results

We first provide a descriptive overview of the ripeness of the MSF’s elements. We consider an element to be ripe if the set membership score is higher than 0.5. Table 3 provides an overview of the ripeness of streams and the opening of policy windows for our six countries’ 16 legislative periods. The table offers three major insights. First, and in line with the basic expectation of the MSF, a carbon tax is introduced when all elements are ready for coupling. Such a favourable situation for the introduction of carbon taxation arose in Iceland (2009–2013) and Ireland (2007–2011) when environmental and fiscal pressure coincided with green-minded governments and windows of opportunity. A carbon tax is also adopted when the problem stream is exclusively ripe due to fiscal pressure, with the other elements also ready for coupling. This is the case in the UK (2010–2015) and in France (2012–2017). Notably, the same constellation did not lead to the adoption of carbon taxation in France from 2007 to 2012.

Table 3. Overview of the MSF’s elements

Note: “–” indicates that the element is not ready for coupling; “+” indicates that a element is ready for coupling.

The second finding concerns the timing of the reforms in the six countries. According to the MSF’s logic, the probability of the adoption of a policy increases with the number of MSF elements ready for coupling. In our case, this logic indeed applies to four countries, as the conditions for reform became more favourable in Iceland, Ireland, France, and the UK over time. The other two countries do not fit this pattern. In Portugal and Spain, there was, based on our calibration, neither policy window nor ripe political stream but only a ripe problem stream due to fiscal pressure at the time of the adoption of the carbon tax. Since we assume the availability of a policy window to be a necessary condition for policy adoption, we will return to this surprising finding in the case study section. At this point, the Iberian cases indicate that fiscal pressure plays an important role in the introduction of carbon taxation. Notably, fiscal pressure was existent in all six countries when the carbon tax was adopted. The third finding is thus that, based on our descriptive results, strong pressure for budget consolidation is more important than missing the climate targets, presumably because it exerts a strong reform pressure on green-minded and not so green-minded governments alike.

Necessary and sufficient conditions

In the next step, we turn to necessary and sufficient conditions using fsQCA. The measurement of consistency indicates to which degree a condition is sufficient and/or necessary for an outcome. While the choice of an appropriate level of consistency is research specific, the literature recommends a condition to exceed the consistency level of 0.75 to be sufficient and of 0.9 to be necessary (Schneider and Wagemann Reference Schneider and Wagemann2013, 119–143; Sager and Thomann Reference Sager and Thomann2017, 300).

Concerning necessity, though no single condition reaches the critical consistency level of 0.9, the condition ‘budget’ in the problem stream comes close with a value of 0.81 (see Table A4 in the Appendix). This is in line with our descriptive results, which show that each government that introduced a carbon tax was under fiscal pressure at that time. However, the interpretation of the result is complicated by the problem of triviality, which states that a necessary condition could be trivial if its distribution is skewed, i.e. if the condition is present or absent in too many cases of the sample (Schneider and Wagemann Reference Schneider and Wagemann2013, 236). The so-called relevance of necessity (RoN) value indicates if this is the case. Following Schneider (Reference Schneider2018, 250–251) in suggesting that only conditions above a RoN value of 0.5 are not trivial, we see that the condition “budget” (RoN = 0.59) narrowly passes the threshold. One reason for the skewness of the condition is the global financial crisis starting in 2007. Based on our results, we cannot conclusively answer the question if fiscal pressure was indeed necessary for the adoption of carbon taxation. The subsequent case studies will offer more evidence on the impact of deteriorating public finances on the adoption of carbon taxation.

The analysis of sufficiency provides one solution path, which covers the Irish as well as the Icelandic case (see Table 4).Footnote ⁷ The solution path shows that only the combination of all four elements is sufficient for the adoption of carbon taxation, i.e. only the interplay of fiscal and environmental pressure, favourable political conditions, and the openness of a policy window definitely leads to this outcome. This result is in line with our expectation that policy adoption is most likely when the streams are ripe and a policy window is available. As expected, every other constellation is not sufficient for the adoption of a carbon tax, though the tax may nevertheless be introduced under less favourable conditions as the descriptive results show.

Table 4. Sufficient solution paths

Note: “∼“ indicates the negation of a condition. “*” stands for a logical “and”. “+” stands for a logical “or”.

Ireland

The Irish case covers two legislative periods with different outcomes. After the carbon tax had been on the agenda but was ultimately postponed in the first period from 2002 to 2007, it was adopted after the change of government following the 2007 election. According to our findings presented in Table 3, changes in the problem stream (fiscal pressure) as well as the opening of a policy window should be responsible for the different outcomes.

The first legislative period was marked by mixed signals in the problem stream. The environmental pressure was substantial, as the Environmental Protection Agency estimated that Ireland would overshoot its emission targets by about 25% and called for urgent emission reductions (EPA 2004). Consequently, the Minister for the Environment, Martin Cullen (Fianna Fáil), proposed carbon taxation as an instrument to reduce emissions and avert fines of €1.3 billion for breaching the Kyoto Protocol (Coghlan Reference Coghlan2007, 147). The main advocate of the carbon tax was, however, Noel Dempsey (Fianna Fáil) who had negotiated Ireland’s emission targets at the Kyoto conference and now served as Minister for Communications, the Marine and Natural Resources. Dempsey had developed the government’s climate policy agenda and pushed for domestic measures such as carbon taxation (Coghlan Reference Coghlan2007, 138–141). Driven by “an inclination to ‘do the right thing’”, Dempsey pursued his goal with a “focus on policy detail” as well as “stubbornness” (Little Reference Little2017, 206). Backed by Dempsey and the epistemic community, amongst others economists from the OECD and the domestic Economic and Social Research Institute (Stapleton et al. Reference Stapleton, Lenihan, Killian, O’Sullivan and Business2006; Coghlan Reference Coghlan2007, 148), the carbon tax became part of the budget plan presented at the beginning of the legislative period (Government of Ireland 2002). In sum, there was substantial environmental pressure to act, a policy community supportive of a carbon tax, and policy entrepreneurs within the government.

So why did the reform initiative for a carbon tax nevertheless fail? The answer to this question can be found in the problem stream as well as in the political stream. Fiscal pressure, the most important factor according to the QCA, was nonexistent as the Irish government was presiding over budget surpluses from 2003 to 2007. Based on interviews, Clinch and Dunne (Reference Clinch and Dunne2006, 958) conclude that “at the height of Ireland’s economic boom when exchequer receipts were at an all-time high, the revenues from environmental taxes were of very limited interest to Irish officials“. In the political stream, Dempsey and Cullen faced substantial resistance not only from the junior partner in the coalition, the Progressive Democrats (PD), but also from their own party. The PD-led Department of Enterprise sided with the Irish Business and Employers Confederation which opposed the new tax fearing for Ireland’s international competitiveness (Little Reference Little2017, 206). Against this background of departmental disunity, Finance Minister Charlie McCreevy (Fianna Fáil) held an important position in the policy process. Without the urgency to generate additional revenues, McCreevy first postponed the carbon tax by consulting the social partners and, sensing resistance by employers and unions alike, abandoned it altogether in September 2004. The decision was made at a time of rising oil and gas prices and thus justified on grounds of fighting inflation (Coghlan Reference Coghlan2007, 141–150; Little Reference Little2017, 205–209). To sum up, the initiative for carbon taxation failed due to Ireland’s economic boom, which eased fiscal pressure and fuelled inflation, and formidable resistance by influential actors inside and outside of the government.

The adoption of a carbon tax in December 2009, the midst of the subsequent legislative period, was preceded by two significant changes, one occurring in the political stream, the other in the problem stream. The former change resulted from the 2007 election, after which the Green Party joined the governing coalition. This clearly created a policy window as the Green Party was willing to use its political capital to push for the carbon tax of €20/tCO₂ promised in its election manifesto (Green Party 2007, 10–11). As a result, the proposal was not only included in the government program but also subsequently kept alive by the Greens. Most importantly, when another endless delay of the tax loomed in 2009, party leader and environment minister John Gormley acted as policy entrepreneur. In the wake of severe losses in the 2009 local elections, the Green Party’s leadership made clear that the party would leave the government if there would not be “green fingerprints all over the renegotiated government program” (Brennan Reference Brennan2009). Thus pressured by the Greens, Fianna Fáil finally gave in and the carbon tax was included in the renewed government program and approved by parliament in December 2009 (Government of Ireland 2009, 4; Convery et al. Reference Convery, Dunne and Joyce2013, 11).

In the meantime, the problem stream also had altered substantially in 2008 when the global financial crisis had hit Ireland with full force, resulting in enormous fiscal pressure. The recession and rescue packages for collapsing private banks had turned budget surpluses into massive deficits of 7% of GDP in 2008 and almost 14% of GDP in 2009, with worse to come in the following years (OECD 2009). Under those dire fiscal circumstances, austerity measures including spending cuts and tax increases were seen as inevitable by the government to restore public finances (Government of Ireland 2008). As part of the 2010 budget, the carbon tax offered a small but substantial amount of the €4 billion in savings of “the most austere Budget in the history of the State” (McGee Reference McGee2009). To put this into perspective, the €246 million raised by the carbon tax amounted to about 25% of total tax increases (Convery et al. Reference Convery, Dunne and Joyce2013, 13–16). While the tax meant increased costs of living for most households and was thus far from popular, it could at least be justified on environmental grounds.

In sum, the Irish case demonstrates how rising problem pressure due to deteriorating public finances and government participation of the Greens facilitated the coupling efforts of policy entrepreneurs and thus paved the way for policy adoption. Notably, urgent fiscal pressure proved more important in this regard than latent environmental pressure.

Portugal

The Portuguese case covers three legislative periods, with two socialist governments (2005–2009, 2009–2011) followed by a conservative government in 2011. Based on our previous findings, the introduction of carbon taxation in 2014 is quite surprising, since the conditions for a carbon tax appear to have deteriorated over time (see Table 3). However, a closer look at the Portuguese case reveals that a policy window opened in the political stream during the third legislative period which led to the adoption of carbon taxation.

At first sight, conditions for the adoption of a carbon tax seemed promising after the 2005 election. In the election campaign, the Socialist Party (PS) put a stronger emphasis on environmental issues than their main right-wing opponents, though a carbon tax was missing in the former’s manifesto (PS 2005). In addition, green taxes presented one option to deal with the budget deficit, which exceeded the SGP threshold of 3%. In fact, a carbon tax was mentioned in the government’s ‘Grand Option Plan 2005–2009’ (Lei 52/2005) approved by parliament in August 2005. However, the complete disappearance of the carbon tax from the governmental agenda in the subsequent years indicates that the PS did not act out of conviction but merely reacted to external pressure from the EU (Carvalho et al. Reference Carvalho, Schmidt, Santos and Delicado2014, 203–207). Crucially, a national policy entrepreneur who could have capitalised on the rather favourable conditions was missing.

After the 2011 election, the Socialist government was replaced by a coalition of two center-right parties, the Social Democratic Party (PSD) and the People’s Party (CDS-PP). In line with our QCA, this change of government negatively affected the political stream, leading to “a significant restructuring of the Ministry of the Environment, a reduction in government agencies and the downgrading of environmental issues in general and climate change in particular in government priorities” (Carvalho et al. Reference Carvalho, Schmidt, Santos and Delicado2014, 206). In the election campaign, the introduction of a carbon tax was neither proposed by the PSD nor by the People’s Party to contribute to the fiscal consolidation demanded by the Troika (CDS-PP 2011; PSD 2011). Developments in the problem stream may have contributed to this reluctance. The economic crisis led to massive budget deficits but at the same time reduced industrial production and thus carbon emissions. Consequently, fighting climate change was not at the top of the public agenda: “In 2011, 75% [of Portuguese respondents in the Eurobarometer] considered climate change a very serious problem. […] However […] only 7% […] chose climate change (against 20% of Europeans) as the most serious problem” (Carvalho et al. Reference Carvalho, Schmidt, Santos and Delicado2014, 207–208). Unsurprisingly, the economic crisis was the main concern of Portuguese respondents. Finally, neither the problem stream nor the political stream provided potential policy entrepreneurs with a policy window in 2011.

However, things changed abruptly in July 2013, when Prime Minister Pedro Passos Coelho reshuffled the cabinet to avert the collapse of the coalition (Magone Reference Magone2014). The government crisis was sparked by the resignation of Finance Minister Vítor Gaspar as a reaction to a negative ruling by the Constitutional Court against some of Gaspar’s austerity measures. Passos Coelho’s appointment of Maria Luis Albuquerque as new Finance Minister without consultation of the People’s Party led to a deep government crisis which was solved by a cabinet reshuffle. In the context of our analysis, the crucial change concerned the Ministry of Environment: “The quite large ministry of Agriculture, Sea, Environment and Planning of Territory was […] split into two. The existing minister, Assunção Cristas, was appointed head of the new Ministry of Agriculture and Sea, and newly appointed Jorge Moreira da Silva was placed in charge of the new Ministry of Environment, Territorial Planning and Energy” (Magone Reference Magone2014, 259).

The appointment of Moreira da Silva proved crucial as he was not only an influential figure within the PSD but also “the man of renewable energies and the carbon tax” (Ferreira Reference Ferreira2013). In terms of the MSF, Moreira da Silva comes close to the ideal policy entrepreneur (cf. Kingdon Reference Kingdon1995, 179–183), combining political influence as minister and the PSD’s vice president with an academic background and a clear policy agenda on fighting climate change. Having been an “important policy entrepreneur [who] displayed a capacity to build alliances and to put together a crossparty consensus, covering both progressive-environmentalist and conservative pro-business fractions” (Braun Reference Braun2009, 483) when serving as rapporteur in the European Parliament during the creation of the EU ETS, Moreira da Silva founded the Lisbon-based think tank “Platform for a Sustainable Growth” in 2011. A report published by the think tank in December 2012 recommended “[r]eplacing the possible extension to 2014 of the 3.5% surcharge on Individual Income Tax applied in 2013 by introducing a carbon tax of €9.00 per ton of CO2, discouraging national greenhouse gas emissions and inducing more sustainable production and consumption standards” (Moreira da Silva Reference Moreira da Silva2012, 17). As early as August 2011, Moreira da Silva publicly spoke out in favour of a carbon tax instead of raising income taxes (Alvarez Reference Alvarez2011).

In terms of the MSF, Moreira da Silva’s promotion opened a policy window in the political stream. Based on the powerful environment minister’s initiative, a commission on green tax reform (reforma fiscalidade verde) was established in early 2014. In September 2014, the commission published its final report, amongst others proposing a carbon tax along the lines of Moreira da Silva’s previous recommendations (Comissão Fiscalidade Verde 2014, 65–93). Notably, the carbon tax and additional green taxes were presented as a way to reduce taxes on labour income which had risen during the fiscal crisis (Portuguese Ministry of Environment 2014, 2–4). The carbon tax was approved by parliament in November 2014 as part of the green tax reform and introduced in 2015. In short, Moreira da Silva, after profiting from a government crisis triggered by fiscal pressure, served as an extremely influential policy entrepreneur who skillfully coupled the three streams to further green tax reform including carbon taxation. Crucially and in contrast to our theoretical assumptions, it was not a change in government but a cabinet reshuffle which opened the policy window in the middle of the legislative period.