Why local governments set climate targets: Effects of city size and political costs

Cities increasingly address climate change, e.g. by pledging city-level emission reduction targets. This is puzzling for the provision of a global public good: what are city governments’ reasons for doing so, and do pledges actually translate into emission reductions? Empirical studies have found a set of common factors which relate to these questions, but also mixed evidence. What is still pending is a theoretical framework to explain those findings and gaps. This paper thus develops an abstract public choice model. The model features economies of scale and distinguishes urban reduction targets from actual emission reductions. It is able to support some stylized facts from the empirical literature and to resolve some mixed evidence as special cases. Two city types result. One type does not achieve its target, but reduces more emissions than a free-riding city. These relations reverse for the other type. The type determines whether cities with lower abatement costs more likely set targets. A third type does not exist. For both types, cities which set targets and have higher private costs of carbon are more ambitious. If marginal net benefits of mitigation rise with city size, then larger cities gain more from setting climate targets. Findings are contrasted with an alternative model where targets reduce abatement costs. Some effects remain qualitatively the same, while others clearly differ. The model can thus guide further empirical and theoretical work.