For decades, governments have tried to address climate change and other global problems. Many agree that in the field of climate policy, these efforts have made only limited progress. Yet, while international negotiations have been frustrating to many, climate-relevant policies have proliferated at the subnational level. Subscribing to the slogan ‘think globally, act locally’, subnational policymakers increasingly create environmental policies that aim to reduce air pollution, conserve natural resources and protect the climate. Examples range from local public transport policies (for example, the share of electric buses used for public transport or regulations on the number of cars allowed to enter specific areas) and individual incentives (for example, subsidies for employees using public transport to commute to work instead of their own car) to regional building codes (for example, requiring new buildings to meet specific energy efficiency standards).
One explanation for these increasingly frequent bottom-up initiatives is that they intend to address climate change and other environmental problems directly. We argue, however, that individual actors such as cities or municipalities have almost no direct individual impact on large-scale, transboundary problems such as global warming. Our alternative explanation highlights that their policy choices may have important effects on their own national government and its regulatory decisions. For example, cities that enact environmental regulations and implement CO2 reduction targets make it more costly for the national government to deviate from this emerging policy pattern. Informational benefits, co-ordination failure, inconsistent regulations, costly delay and loss of economies of scale generally favor a harmonization of policies across national and subnational levels.
Using game theory, we show that if subnational actors are aware of their impact on national policymaking, this has important implications for which policies they choose to implement and also depends on the shadow of the formation of international agreements. We find that strategic policy balancing is one of the key mechanisms that may explain subnational policy choices in the presence of national and international policymaking. Very often, ambitious subnational policymakers will over-regulate, while lagging subnational policymakers under-regulate to strategically achieve a more favorable international treaty.
Of course, cities and municipalities are not the only types of subnational actors trying to influence national and international policy decisions. With some modifications, our theory may therefore be extended to also illuminate the behavior of other actors such as lobbyists, voter groups, or even courts. We hope that this will make it easier for policymakers and the interested public to understand the functioning of bottom-up initiatives and assess their potential impact on climate-relevant policies.