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Manuel Linsenmeier, Mr. Adil Mohommad, and Gregor Schwerhoff

second-best policies ( Fischer et al., 2021 ). Our paper adds to this debate another layer of complexity, the temporal sequence of policy adoption. In principle, policies that might be considered second-best for a specific market failure, such as the negative externalities from GHG emissions, can also be considered as temporary remedies that facilitate a later adoption of the first-best policy ( Pahle et al., 2018 ). This idea is generally consistent with the empirical evidence on the temporal sequence of policy adoption that we report in this paper. Indeed, our

Manuel Linsenmeier, Mr. Adil Mohommad, and Gregor Schwerhoff
In this paper, we study the international diffusion of carbon pricing policies. In the first part, we empirically examine to what extent the adoption of carbon pricing in a given country can explain the subsequent adoption of the same policy in other countries. In the second part, we quantify the global benefits of policy diffusion in terms of greenhouse gas emission reductions elsewhere. To do so, we combine a large international dataset on carbon pricing with several other datasets. For causal identification, we estimate semi-parametric Cox proportional hazard models. We find robust and statistically significant evidence for policy diffusion.
Manuel Linsenmeier, Mr. Adil Mohommad, and Gregor Schwerhoff
Carbon pricing is considered the most efficient policy to reduce greenhouse gas emissions but it has also been conjectured that other policies need to be implemented first to remove certain economic and political barriers to stringent climate policy. Here, we examine empirical evidence on the the sequence of policy adoption and climate policy portfolios of G20 economies and other major emitters that eventually implemented a national carbon price. We find that all countries adopted carbon pricing late in their instrument sequence after the adoption of (almost) all other instrument types. Furthermore, we find that countries that adopted carbon pricing in a given year had significantly larger climate policy portfolios than those that did not. In the last part of the paper, we examine heterogeneity among countries that eventually adopted a carbon price. We find large variation in the size of policy portfolios of adopters of carbon pricing, with more recent adopters appearing to have introduced carbon pricing with smaller portfolios. Furthermore, countries that adopted carbon pricing with larger policy portfolios tended to implement a higher carbon price. Overall, our results thus suggest that policy sequencing played an important role in climate policy, specifically the adoption of carbon pricing, over the last 20 years.