Can money buy you (climate) happiness? Economic co-benefits and the implementation of effective carbon pricing policies in Mexico

It is difficult for governments to implement effective climate change mitigation policies because they often create short-term costs for concentrated industry groups who oppose them. As such, climate policy scholars have theorized that governments will be more willing and able to implement mitigation policies where they align with other economic policy objectives. The logic of this "economic co-benefits" argument is that co-benefits create short-term gains for governments to offset the immediate costs they face in introducing mitigation policies. Through a most-similar systems design comparative study of a carbon tax and an emissions trading scheme (ETS) in Mexico, this article interrogates the economic co-benefits theory of mitigation policy adoption. By comparing the motivations underpinning two carbon pricing policies in a single country, the article suggests that the presence of immediately accruing fiscal revenues created short-term incentives for the Mexican government to implement the carbon tax, whereas such short-term incentives were not present with respect to the ETS. However, in both cases concentrated affected industry groups were able to dilute the carbon prices to which they were subject. The implications of this study are that economic co-benefits may not be as useful in achieving effective mitigation policy outcomes, in the absence of measures which also independently change the interests of concentrated industry groups.