Uncovering Sectoral Differences in the Political Economy of the EU Emissions Trading System

Mitigating climate change requires fast and deep socio-technical transitions in the transport, energy, and several industry sectors. Over the last decades, research has provided important insights on the role of policies in phasing in new and phasing out old technologies and has recently started to uncover the politics behind these policies. However, extant empirical accounts of the political economy of transitions have focused on single cases, i.e. single sectors. A comparative cross-sectoral approach to systematically uncover sector differences in the political economy of transitions is thus far lacking. Understanding such differences is important to develop strategies to overcome political resistance to deep socio-technical transitions (also beyond climate change-related transitions). Here, we address this gap by asking whether sectoral characteristics can explain the political positions of industry actors towards the EU Emissions Trading System (ETS). To this end, we derive hypotheses based on sector-focused innovation literature and industrial organization theory. We propose that the ability to pass on cost and internal competition (including the threat of new entrants) determines sectoral differences in actors’ political support or opposition. We compare four sectors – aviation, electricity generation, oil refining, and steel production– regarding actor positions, due to their variance in the above-mentioned characteristics. While acknowledging the relevance of policy mixes in inducing socio-technical transitions, we focus on one instrument in order to reduce complexity and noise through institutional variance. The EU ETS is not only the world’s single largest emissions pricing instrument but also forms a center piece of the European low-carbon energy policy mix. Our research design is confirmatory, using a diverse case selection strategy. Methodologically, we use discourse network analysis to identify and trace industry actor positions across all four sectors. Empirically, we exploit data from the official public consultations that accompanied each major reform of the EU ETS from its inception in 2000 to its revision in 2014. Our preliminary results largely confirm our hypotheses but also provide interesting new insights. Specifically, we find that industry actor positions can change in case of altered sectoral characteristics that result from socio-technical change. Based on our findings we derive implications for sector-specific strategies on how to overcome political opposition by incumbent regime actors.