WP4: Political Economy, Institutions, and Development


  • To find the limitations of international climate policies.
  • To better understand the nature of domestic climate policies and institutions.
  • To improve understanding of the key roles of developing countries in future energy and climate policies.
  • To build new theoretical foundations for distributional and ethical concerns related to climate change models.
  • To integrate approaches to environmental investment and finance under risk and uncertainty.

Task 1: International cooperation

Using game theory, this task investigates possibilities for and hindrances to cooperation in international environmental negotiations and coordination among international commitments on GHG emissions and national policies. On the policy level, this is closely linked with yearly UN Climate Change Conferences (COP) and utilizes the expertise of lawyers, political scientists and behavioural experts in the area of public policies and diplomacy.

Task 2: National and regional policies and institutions

We address public acceptability of policies and specific policy measures that might be influenced by individual factors (such as environmental concerns and values, subjective norms or perceived behavioural control), or by characteristics of the policy to be implemented. Both developed and emerging markets (China etc.) are considered. Since the external costs and the ancillary benefits cross national borders, we address the issue of economic standing in the determination of the social costs of carbon and air pollution damage in the policy decision-making process. Deep understanding of relevant public policies, regulations and institutions forms the necessary basis of this task.

Task 3: Mitigation, adaptation and economic development

Links between climate change policies and economic growth are analysed in this task, especially in the context of developing countries, including China. The role of innovation promoted by a climate policy is assessed with regard to its ability to foster growth. Wide connections with development economics are vital for the execution of this task.

Task 4: Inter-intra generation equity

This task explores the distributive consequences of climate change impacts and policies, both across and within generations. It also investigates discounting and the problems of time preferences and their development over time. It focuses on theoretical modelling mainly in economics with important connections to ethics and moral philosophy.

Task 5:  Investment, finance and risk

This task explores private sector risk management strategies, risk assessment, tools to reduce risk and avoid vulnerability lock-ins, and the role of insurance. Many behavioural flaws related to risk perception and market failures (adverse selection, moral hazard) require policy interventions. Strong interaction with financial economics is a defining feature of this task.

Published results

Ambec, S., Esposito, F., & Pacelli, A. (2023). ‘The economics of carbon leakage mitigation policies.’ Toulouse: Toulouse School of Economics, Working paper no 1408.