Democracy is key to effective climate policy

While the theories discussed above focus on the policy effects of the current level of democracy, they are still relevant for our empirical investigation which focuses on the stock of democratic capital. Today's environmental policies are the result of numerous historical institutional and policy choices, all influenced by the level of democracy at the time. Different historical experiences with democracy are likely to lead to different policy outcomes, as previous decisions form the base for subsequent choices. Our measure of democratic capital takes this historical process into account. Moreover, our measure helps capture transitions between democracy and autocracy which are by themselves likely to be detrimental to building the institutions needed to produce global public goods. It may also take time for environmental policy to become a focus of the democratic process. In countries such as Serbia and Sierra Leone with high values of current democracy but with limited histories of democracy, the democratic and electoral process may not have had enough time to focus on a “secondary policy” (List and Sturm, 2006) such as environmental policy.3 Only over time will voters and environmental interest groups (needing time to organize) pressure politicians to start formulating appropriate institutions and policies. One channel through which the democratic capital stock may affect environmental policy is by raising expectations that the country will be a stable democracy in the future (Persson and Tabellini, 2009). Persson and Tabellini report that the probability of a currently democratic country remaining democratic increases with a larger democratic capital stock, and that democratic capital raises economic growth (indirectly, by increasing stability).4 Persson and Tabellini argue that a virtuous circle exists where the accumulation of democratic and physical capital reinforces each other. Thus, democratic capital may actually help drive the Environmental Kuznets Curve (EKC) relationship documented in the literature (Dinda, 2004 and Fosten et al., 2012). Second, an expectation of continued stable democracy may also result in advocates for environmental policies having a greater incentive to fight for reform because their influence will continue in the future. Third, an expectation of continued democracy increases the time horizon of politicians and political parties. This matters for environmental policymaking where costs occur earlier than the benefits, especially for climate change policies. If democracy is more likely to prevail, democratic parties and their constituent groups are more likely to benefit from implemented environmental policies in the future.5 Fourth, if polluting industries have higher expectations that the country will remain democratic it may be relatively less beneficial to wait with investment in pollution control technology and to lobby against regulations. Fifth, competitive leadership selection processes in democracies are likely to yield more competent leaders (Besley and Reynal-Querol, 2011).6 Since environmental policies are generally built slowly over time, a history of competent leaders influences policy outcomes positively.