Analysing preferences towards economic incentives in combating climate change: a comparative analysis of US states

In contrast to the federal government, some US states have taken an aggressive approach to curbing climate change. They use a variety of policy instruments to reduce greenhouse gases. These instruments can be categorized into two broad categories: economic incentives and command-and-control regulation. While the use of economic incentives has, on average, increased, some states employ them more than others. This article compares the propensity of different US states to employ economic incentives in the area of climate change. For this purpose, it analyses and tests four models: (i) a needs/responsiveness model, (ii) an interest group influence model, (iii) an innovation-and-diffusion model, and (iv) a combined model. Interestingly, this article finds that economic incentives are pushed out of the political agenda when states are confronted with a more severe problem in terms of carbon emissions and dependence on conventional energy. This article also finds support for the traditional, antagonistic view of ‘industry versus environmentalists’: electric utility companies tend to oppose economic incentives, while environmentalists and renewable energy producers tend to support them.