restricted access Explaining the Schwarzenegger Phenomenon: Local Frontrunners in Climate Policy

The surge of local climate policy is a puzzling political-economic phenomenon. Why have local policy-makers, incapable of mitigating global warming through individual emissions reductions, adopted ambitious policies while national governments refrain from action? I construct a game-theoretic model of twolevel climate policy with incomplete information over political benefits. In equilibrium, the government selects a lax national regulation, and local policymakers with private information on high local benefits choose more ambitious policies despite incentives to free ride. The analysis also suggests that even though local policy-makers prefer not to reveal information to the government, they must do so to pursue short-term political gains. Counterintuitively, new information can lead to more ambitious national regulation even if the government learns that the local political benefits are likely lower than expected. As an empirical application, I study the evolution of climate policies in the United States.