Part II - Setting the Stage

2 A Framework for Studying Institutional Output and Its Alignment, Causes and Consequences

Exploring how the G20, OECD and IMF addressed fossil fuel subsidies and climate finance through the lens of economisation requires an analytical framework studying not only how the institutions addressed the issues, but also the causes and consequences of their doing so as well as their alignment. In this context, it is useful to draw on David Easton’s (1965, chapter 22) distinction between the output and outcome of policy systems.¹ Adapted to the study of international institutions, output concerns what the institutions do, specifically the regulations, policy instruments, compliance mechanisms and so forth they produce (Gutner and Thompson, 2010; Young, 2001). The outcome concerns the consequences of the output in terms of changes in actor behaviour (Easton, 1965; Young, 2001). Besides output and outcome, the book also studies how the output of international institutions is aligned (degree of conflict or synergy) as well as the factors that have shaped the output. Studying the institutions’ economisation of climate finance and fossil fuel subsidy reform requires studying their output to identify precisely how they have addressed the two issues as economic ones. As discussed in Chapter 1, economisation consists of two dimensions: (1) the economic institution (or actor) addressing the issue and (2) how it has addressed it, here operationalised as the institution’s output.

The framework consists of different elements intended to study causes, output, alignment and outcome respectively. Within this framework, certain concepts appear in several of the steps, namely ideas (including normative and cognitive ones) and incentive structures (see Table 2.1), and constitute central themes of the book. Others, such as entrepreneurs or agenda-setting, appear in only some of the stages. Given the focus on economisation and the economic character of the institutions, the book pays particular attention to how factors pertaining to this character (e.g. the economic training of their officials) have shaped how they addressed climate finance and fossil fuel subsidies, as well as the consequences of the economisation (e.g. inducing finance ministries to address fossil fuel subsidies). The similar concepts appearing at different steps (e.g. cognitive ideas) are closely interrelated. As an illustrative example, the cognitive aspects of the institutional worldview may play a bigger role than other factors in shaping cognitive output such as causal claims, which again may potentially play a more important role than other factors in changing cognitive ideas in other institutions and countries, thus constituting a cognitive pathway with several steps.

Table 2.1 Analytical framework

	Output	Alignment (synergistic, conflictive, cooperative)	Causes	Consequences (international and domestic)
Cognitive (ideas)	Cognitive ideas (e.g. definitions, causal claims)	Interpretation of cognitive ideas	Institutional worldviews (cognitive aspects)	Changes to cognitive ideas (including learning)
Normative (ideas)	Norms, normative ideas	Interpretation of norms	Institutional worldviews (normative aspects)	Normative change (including norm diffusion)
Incentive structures	Commitments, conditionalities	Incentives (direction of)	Membership circle, degree of autonomy from member states	Commitments, conditionalities
Others		Types of output Actors targeted	Entrepreneurs Interaction with other institutions	Agenda-setting

2.1 Institutional Output: What Is It They Do?

International institutions produce different kinds of output, such as legally binding agreements, expert reports and the provision of venues for informal networking and learning. Importantly, I focus on all kinds of actions that an institution undertakes that are directed at its external environment (i.e. not those concerning its internal dynamics such as changed procedures; see Knill and Bauer, 2016). Before turning to cognitive, normative and incentive-oriented aspects of institutional output, I discuss the different types of formal and informal output.

I divide the formal output targeting the external environment into four categories. The first is the regulatory output that promotes or prohibits specific actions, including the setting of commitments (both legally binding and soft law), recommendations and criticisms of specific actions (Tallberg et al., 2016). The second is the declarative output that asserts a joint position of the institution, for example common goals (Tallberg et al., 2016). It may de facto be difficult to distinguish between regulatory and declarative output, as declarative statements may also limit member states’ possibilities of undertaking specific actions. The third is the knowledge output that consists of the creation and distribution of knowledge through publications, including data and analyses (Barnett and Finnemore, 2004), for example of the landscape of climate finance. The fourth is distributive output that reallocates resources, in the shape of financial and technical resources (e.g. for capacity-building), sanctions or punishments, and conditionalities for enjoying particular benefits, for example IMF conditionalities for receiving IMF loans (Tallberg et al., 2016). The informal output includes informal consultations (e.g. between representatives of the institutions and a country government), low-key support for policymaking (e.g. advice) and workshops and seminars providing a venue for the dissemination of knowledge and interaction between actors. In this way, the workshops and seminars allow for learning and socialisation.

It makes sense to focus on three aspects of their output, namely the cognitive, normative and incentive-based dimensions.² These three dimensions can be found in most of the aforementioned outputs, for instance do all of them involve some kind of cognitive aspect in terms of defining what is important. While the classification of the output according to the typology outlined earlier is important for understanding their respective roles and comparing them, focusing on these three dimensions is crucial for understanding economisation. Specifically, the cognitive and normative dimensions concern (inter alia) how and to which degree an issue is framed as an economic issue (the second aspect of economisation), but can also involve other kinds of framings, for instance in terms of equity. Incentives do not concern economisation as directly as the other two dimensions but understanding the output and outcome of the institutions requires studying the incentive-based dimension of this output as well as the cognitive and normative dimensions.

The distinction between cognitive and normative aspects draws on the distinction between cognitive ideas regarding what something is or how to understand a given issue and normative ideas regarding ‘what is good or bad’ about ‘what is’, good and bad understood in terms of ‘what one ought to do’ (Schmidt, 2008). In terms of economisation, this may play out in terms of framing climate change as an externality or a market failure, a framing that includes the cognitive idea that climate change constitutes a market failure and the normative idea that this market failure should be corrected to create a long-term optimal outcome (see Jacobs, 1997; Katz-Rosene and Paterson, 2018; Skovgaard, 2012). In practice, normative and cognitive ideas are often closely intertwined, for example framing a stream of revenue as climate finance leads to the conclusion that providing such revenue is appropriate. Yet, I argue that it makes sense to distinguish between them for heuristic reasons: comparing the output between the three institutions and the two areas in question provides more analytically useful results if you are able to identify to what degree the output differs regarding normative and cognitive ideas. Importantly, mainstream economics rarely determines exactly how ideas firmly established in the discipline should be applied, and hence diverging applications of ideas rooted in this discipline (even within the same paradigm such as neoclassical environmental economics) are possible.

The cognitive dimension covers the definition of what issues are, in this case climate finance and fossil fuel subsidies. More specifically, the cognitive dimension of the institutional output generally speaking refers to ideas regarding causal relations (e.g. ‘X causes Y’) as well as how empirical phenomena should be defined and what is important about them (Sabatier and Weible, 2014; Schmidt, 2008). For instance, cognitive ideas regarding fossil fuel subsidies or climate finance may concern how they should be defined, what their consequences are, how they can be reformed or scaled up and so forth. Regarding causal relations, the cognitive dimension concern ideas regarding the causes of a given policy issue and the consequences of the policies addressing these issues (Campbell, 1998). Such causal ideas may concern how to best promote fossil fuel subsidy reform or use climate finance. Regarding the definition of the phenomena, both issues have been characterised by intense disputes over their definitions, that is whether a given policy can be characterised as a fossil fuel subsidy (Skovgaard, 2017a; see Chapter 4 for more details) or a financial flow as climate finance (Roberts and Weikmans, 2017; Skovgaard, 2017b; see Chapter 9 for more details). The definitional aspect is important not only in terms of which policies or financial flows fall under the definition, but also which aspects of the issue (fossil fuel subsidies or climate finance) are important, for example if they are framed as economic issues rather than environmental or development ones. Often, the definition of the problem shapes causal ideas about the solutions that are logical to use (Schön and Rein, 1994). On a closely related note, the cognitive dimension also concerns the kinds of data that are relevant for understanding the issue, for example whether it is best measured in quantified, monetary terms, specifically in terms of economic costs or benefits (Jacobs, 1997). The production of knowledge is a key type of formal institutional output (as discussed in the beginning of this section), and such knowledge production has a strong cognitive dimension in defining what is important about an issue and how it can be measured, for example the size of fossil fuel subsidies and climate finance flows.

The normative dimension refers to how the institutions define the key normative issues that characterise the politics of fossil fuel subsidy reform and climate finance. Normative ideas refer to normative ideas about ‘what one ought to do’ (Schmidt, 2008), including norms understood as intersubjective standards of appropriate behaviour (Finnemore and Sikkink, 1998; March and Olsen, 1989) as well as more fundamental normative ideas about what is right and desirable. Regarding the former, a relevant example of a norm is the emerging norm of fossil fuel subsidy reform, which defines fossil fuel subsidies as environmentally damaging and as something that should be phased out (Van de Graaf and Blondeel, 2018). More specifically, concerning international economic institutions, Susan Park and Antje Vetterlein (2010b) define policy norms as shared expectations for all relevant actors within a given community about what constitutes appropriate behaviour, which is encapsulated in policy output. Regarding the latter, relevant fundamental normative ideas include the idea that (policy) objectives should be defined in terms of optimising economic output (Cole, 2008; Jacobs, 1997; Skovgaard, 2017b). The exact meaning and application of normative ideas have been highly contested at the international level, as has been the case with the norm of fossil fuel subsidy reform, which has been characterised by disagreement between international economic institutions regarding to what extent many countries subsidise fossil fuels (Skovgaard, 2018; Van de Graaf and Blondeel, 2018). While all output of the institutions has or may have a normative dimension, the normative dimensions are particularly relevant when they act as norm entrepreneurs (Finnemore and Sikkink, 1998).

The third dimension of institutional output consists of incentives, referring to measures that aim to change the incentive structures facing actors. Unlike the ideational dimension, incentives do not alter the ideas and knowledge held by actors or which ideas are considered appropriate or authoritative but aim to change actors’ behaviour by altering the costs and benefits associated with particular actions. While normative ideas may affect actors’ preferences and hence how they react to incentives, the incentive-based dimension of output concerns incentive structures that influence actors without changing their preferences. Thus, while actors may change their preferences, these preferences tend to be constant and determine how the actors respond to incentive structures. More specifically, while the ideational aspects concern the shape economisation takes in terms of how climate finance or fossil fuel subsidies are framed as economic issues (cognitively and normatively), the incentives concern how economisation translates into concrete incentives for and against particular actions. Incentive-based output has been the focus of liberal institutionalist literature, which argues that international institutions are created to provide incentives for cooperation through punishing non-cooperation and rewarding cooperation, for example by providing transparency regarding whether a state cooperates or not, allowing for punishment from other states or an International Organisation (IO) (Keohane, 1984, 1989). The incentive-based output of the institutions may take the shape of regulatory agreements among member states or between the institution and a state, or of distributive output such as the provision of support (both being formal types of output). The former agreements include inter alia commitments between states (e.g. to undertake fossil fuel subsidy reform or provide climate finance), the violation of which may result in sanctions or reputational costs that would reduce the state’s credibility when future commitments (in this field or in others) are to be negotiated (Smith and Urpelainen, 2017). Whereas sanctions are generally explicitly defined as a response of the institution to particular actions, reputational costs operate through states (including but not limited to member states) having less faith in the state violating the commitment. Incentives also include distributional output in the shape of conditionalities (e.g. cessation of IMF loans if countries do not reform fossil fuel subsidies; see also Schimmelfennig et al., 2005; Vreeland, 2007) as well as material support (e.g. finance or expertise) for particular actions. Finally, beyond regulatory and distributive output, the incentive-based output also includes output that allows for states to signal the credibility of their offers or commitments, or to gain more information about the offers or commitments of other states, for example through informal discussions or the provision of data (on the role of commitments and information in international negotiations; see Underdal, 1983).

2.2 How Institutions Align

After identifying the institutional output of the different institutions, the next step is to explore how their output is aligned. While the direct effects of one institution’s output on another institution (e.g. one institution placing a commitment on another) will be studied in the section on the consequences of institutional output, in this section, I focus on the extent to which their output is synergistic, co-existing or conflictive (Biermann et al., 2009a; Zelli et al., 2020). In other words, the different kinds of output may support or undermine each other, or they may be directed at different issues or governance functions in a non-interacting way that neither supports nor undermines the output of other institutions, for example because they occupy different niches (Abbott et al., 2016).

First, regarding the cognitive ideas, if the different institutions use different sets of such ideas to describe the same empirical phenomenon, it may constitute a conflictive relationship (March and Olsen, 1989; Schön and Rein, 1994). Such conflict may concern what is important about the issue or causal relationships in the shape of divergence regarding the causes of or solutions to a particular problem. The institutions may also differ regarding the definition of fossil fuel subsidies and climate finance, and hence also whether a given policy constitutes a fossil fuel subsidy or a financial flow of climate finance. Beyond conflict, diverging outputs may also lead to the outputs being of little relevance to each other and creating confusion among audiences (where similar audiences are targeted) regarding what is important as well as information overload (Skovgaard and Canavan, 2020; Zelli et al., 2020). As regards knowledge that is based on similar or closely related cognitive ideas, the output from the institutions is more likely to be synergistic, for example the IMF building on OECD data on climate finance streams when producing its own analysis of climate finance.

Second, normative output may be more or less conflictive or synergetic, the former in terms of outright conflicting norms but also in terms of differing interpretations of the same norm. Although conflict between the core norms of the institutions (Biermann et al., 2009a) is unlikely given that these core norms are based on very similar economic paradigms (Bernstein, 2001; Chwieroth, 2008; Lehtonen, 2007; Slaughter, 2017), institutions’ interpretations of climate-related norms as well as fundamental normative ideas may differ. The contestation over norms may concern their application to concrete situations (Wiener, 2004), as even relatively minor differences in the interpretation may lead to widely different applications of the norm, for example whether a country’s fossil fuel subsidies are inefficient and hence should be reformed or not (Van de Graaf and Blondeel, 2018). More fundamentally, contestation over normative ideas may concern their general appropriateness and validity, as well as how they should be prioritised vis-à-vis each other, for example how efficiency (also known as cost-effectiveness) should be prioritised vis-à-vis equity (see Chapter 9).

Thus, while the institutions’ economic core norms pull in the direction of synergy on some fundamental issues (e.g. economic growth and stability being key objectives), there is ample scope for synergy and co-existence as well as conflict regarding several normative ideas and the interpretation of norms. Importantly, synergistic relationships may strengthen particular interpretations of norms or normative ideas, for example if several institutions promote the same interpretation of a given norm. Finally, there may be an intentional or unintentional division of labour, in which certain institutions promote specific norms.

Third, in terms of incentives, the key issue is whether these incentives pull in the same or diverging, even opposite, directions. If, for instance, one institution provides support for one kind of action, while another punishes such behaviour, the incentives are conflicting (Gehring and Oberthur, 2009). Synergistic relations are equally possible, for example in the shape of one institution providing (material) support for actions that will help a state to meet its obligations under a commitment produced by another institution. Beyond providing incentives pulling in similar or opposite directions, there is also the possibility that the incentives provided by different institutions crowd each other out, for example by providing such a multitude of different incentives that it is not possible for the actors targeted to respond to all of them (Abbott et al., 2016; Eberlein et al., 2014).

Fourth, it is worthwhile studying how the institutions align in terms of their types of output or governance functions. It is relevant whether all institutions focus on the same kind of output, for example setting commitments or producing knowledge, or if there is an explicit or implicit division of labour, so that one may focus mainly on knowledge production, a second on defining norms and a third on distributive output providing financial incentives (Gehring and Faude, 2014; Zürn and Faude, 2013). While each of the institutions generally provide several types of output, they may differ as to which one is the main type.

Fifth, and finally, it may matter which actors are addressed by the output of the institutions. The three institutions differ concerning the states that are their members: the G20’s membership covers twenty of the largest (developed and emerging) economies, the OECD all developed countries and the IMF most countries in the world. Furthermore, the institutions also differ to some degree regarding the government institutions they interact with: while the IMF and the G20 interact mainly with finance ministries and central banks (and in the case of the G20 also the offices of heads of state and government), the OECD interacts with many different ministries (Kirton and Kokotsis, 2015; Ruffing, 2010; Vreeland, 2007). All things considered, there are significant overlaps in terms of the actors they address, but there is also a range of actors that are addressed only by one of the institutions. An overlap may increase the likelihood of conflicting institutional output, as different institutions may promote diverging norms, knowledge or incentives to the same states (Zelli et al., 2020). This risk is particularly pertinent if they address different ministries within the same country, for example if the OECD promotes one interpretation of a norm to development or energy ministries and the IMF a different interpretation of the same norm to the finance ministry. Institutions addressing different states with differing output risk creating conflictive relationships among countries as well as institutions.

2.3 Causes of International Economic Institutions’ Output and Alignment

The next step is to identify the factors that shape the output and the alignment of the institutions, both in terms of inducing an institution to address fossil fuel subsidies and climate finance in the first place and of shaping how they address them. Importantly, inducing the institutions to address the issues concerns the first aspect (that economic institutions address the issue) and how they address the issue concerns the second aspect of economisation (that they address the issue as an economic one). Thus, although these two aspects are closely related (as discussed in Chapter 1), one factor may be more relevant for the first aspect than the second and vice versa. The factors that shape the output of the institutions are also important for shaping their alignment; that is, if similar factors shape their output, the alignment will be synergistic. Hence, I first outline how the factors may shape the output of an individual institution, and subsequently discuss their relevance to institutional alignment. I draw on strands of international relations literature that focuses mainly on institutions as actors in their own right, independent of state behaviour (Barnett and Finnemore, 2004; Nielson and Tierney, 2003; Park and Vetterlein, 2010a) as well as literature on international institutions and their interaction (Oberthür and Stokke, 2011; Zelli and Asselt, 2013). Given that two of the institutions (the IMF and the OECD) are IOs, the first strand of literature is highly relevant to them but less so (and in a different way) to the G20.

Regarding the IO strand, Biermann et al. (2009b) distinguish among three kinds of influences on IOs: problem structure, extra-organisational (mainly member states) and the organisation itself. The two problem structures of the two policy issues (fossil fuel subsidies and climate finance) are constant between the institutions analysed here, thus allowing for a study of the effect of problem structure only when comparing the institutions’ handling of the two issues (in the concluding Chapter 14). Here, problem structure refers to the position of the issues in policy spheres (in this case economic and environmental), their costs and benefits (here especially fiscal costs), their degree of international contestation (especially North–South contestation) and how entrenched state preferences regarding the issues are (Jinnah, 2015; Weiss and Jacobson, 1999).

Yet, extra- and intra-organisational factors vary between the institutions, allowing for a comparison of the three institutions’ handling of each issue. Intra-organisational influences explain the role of IOs in terms of their organisational culture and policy entrepreneurs within the bureaucracies (Barnett and Finnemore, 2004; Park and Vetterlein, 2010b). Extra-organisational influences mainly explain the role of IOs in terms of their status as agents contracted by principals (the member states) to perform a function that will benefit the principals (Hawkins et al., 2006; Nielson and Tierney, 2003). I argue that although the G20 does not have a bureaucracy as such, it is possible to speak about intra-institutional factors also in its case, namely policy entrepreneurs with an institutionalised role (e.g. G20 presidents and chairs of working groups) and the worldview inherent to the G20 (see also discussion in Chapter 1 of the relationship between IOs and institutions).

I organise the various causal factors from the literature into four categories. These categories are the worldview of the institution³ (intra-institutional), policy entrepreneurs operating within the institution (intra-institutional), relations with member states (extra-institutional) and interaction with other institutions (extra-institutional). While these institutions vary significantly in terms of relations with member states, they vary less in terms of the other factors (see the discussion of case selection in Chapter 1). In Chapter 3, the three institutions’ worldviews, relations with member states and interaction with other institutions are discussed in more detail.

The institutional worldview refers to normative as well as cognitive ideas inherent to the individual institutions and together constitute the worldviews that shape how they perceive and address policy issues (e.g. the IMF’s worldview rooted in neoclassical economics leading it to define the non-pricing of externalities as a subsidy). This worldview may play an important role in shaping how the institutions address fossil fuel subsidies and climate finance, but cannot directly induce them to address it, only constitute a contextual factor for other factors inducing the institutions to address the issues. The sociological institutionalist IO literature focuses on the worldviews of IO bureaucracies (Barnett and Finnemore, 2004; Park and Vetterlein, 2010b), and draws on sociological and historical institutionalist (Hall and Taylor, 1996; March and Olsen, 1989) and cognition-oriented bureaucratic politics literature (Allison and Zelikow, 1999; Drezner, 2000) to argue that such worldviews are inherent to the bureaucratic cultures of the IO bureaucracies. In the words of Graham Allison and Philip Zelikow (1999), ‘where you stand depend on where you sit’. These worldviews are inherent to the institutions and shape how the actors within the institutions perceive policy issues, including what is problematic about them, their causes and how they can and should be addressed (Bacchi, 2009). Thus, the worldview encompasses both cognitive and normative ideas, which, as mentioned previously, are often closely linked, since the framing of the situation defines which norms are salient, which actions are logical and what the consequences of the different actions will be (Kratochwil, 1989).

In the case of bureaucracies, the worldviews are more institutionalised than in a forum such as the G20. Regarding such international bureaucracies, their organisational culture is closely tied to the training (particularly educational background) of the officials – in the case of the international economic institutions their training as economists (Chwieroth, 2010; Kanbur, 2001). Training and worldview are hard to disentangle in practice, not only because they tend to pull in the same direction, but also because organisations characterised by a particular worldview tend to recruit staff with an educational background (from specific disciplines such as economics and even particular universities) that corresponds with this worldview, in this way reproducing the worldview (DiMaggio and Powell, 1983). The worldviews of the institutions are not entirely unitary, but often differ in some respects between different sections and divisions of a bureaucracy (Kaarbo, 1998). Thus, a bureaucracy may be characterised by a shared set of core normative and cognitive ideas, for example that optimising economic value is the main objective and that market logic constitutes an optimal way of achieving it, but may differ among sections regarding secondary beliefs or ideas, for example the relationship between economic value and other objectives (on the relationship between different levels of beliefs or ideas, see Jenkins-Smith et al., 2014). Importantly, the worldview operates on a much broader scale than the cognitive and normative output, that is, the worldview concerns ideas on a conceptual level potentially applicable across a broad range of cases, whereas cognitive and normative output concerns the ideas applied to a concrete situation.

Regarding the worldviews of the three institutions (see also Chapter 3), the OECD’s approach to environmental issues has often been characterised in terms of the paradigm of ‘liberal environmentalism’ stressing economic instruments and compatibility between economic growth and environmental protection (Bernstein, 2001). The IMF is arguably more directly influenced by neoclassical economics than the OECD (Chwieroth, 2008; Howarth and Sadeh, 2011). Finally, the G20 does not have a bureaucracy, but relies on the G20 Presidency as secretariat. Even if the worldviews are less institutionalised in a forum such as the G20, the frequent interaction between actors may establish a shared worldview or at least perspective on an issue, especially if the participants come from bureaucracies with similar worldviews (e.g. finance ministries) and share educational background (DiMaggio and Powell, 1983). A forum for experts within the G20 set-up may develop into an epistemic community sharing normative and causal beliefs as well as a common policy enterprise (Haas, 1992). Even if it does not fully develop into an epistemic community, socialisation processes may be present, in which case the worldviews of the participants start to converge around a set of normative and causal beliefs (Johnston, 2001).

The term policy entrepreneurs refers to individuals within the institutions (especially their bureaucracies) as well as to collective actors, who may induce the institutions to address an issue or promote particular ways of addressing it (e.g. treating climate finance as a kind of development aid). Policy entrepreneurs are understood as actors promoting significant policy change (Mintrom and Norman, 2009). Their activities include framing policy problems, advocating new ideas and policy proposals, specifying policy alternatives, mobilising public opinion and setting the decision-making agenda (Kingdon, 2003; Roberts and King, 1991). As regards new issues, policy entrepreneurs promote them by framing them in ways that lead to particular policy responses (Chwieroth, 2008), and are less constrained in their framings than in the case of established issues. The lesser constraint is due to new issues having a lower degree of precedence (prior action on the issue) and determinacy (agreement on how an issue shall be understood and which ideas apply; see Jordan and Huitema, 2014; Rhinard, 2010; Skovgaard, 2015). They also promote new issues by moving them up the agenda of the institution they operate within as well as other institutions and organisations (Bakir, 2009; Kingdon, 2003). The policy entrepreneurs have to operate within the worldviews of the institutions and frame issues in ways that resonate with these worldviews. They also have to operate within the constraints and opportunities constituted by the resources available and their mandates. In the case of entrepreneurs from IO bureaucracies, these constraints and opportunities originate from the bureaucracy and the relationship with the member states (see later in this section). In the case of the G20, the constraints and opportunities stem from the set-up of the G20, with a Presidency chairing meetings and expert groups reporting to ministerial meetings, as well as constraints and opportunities within the state that the policy entrepreneur works for, for example, domestic decision-making procedures. Policy entrepreneurs are distinguished from norm entrepreneurs in that they work to change policy rather than promoting a specific norm (see Finnemore and Sikkink, 1998 on norm entrepreneurs), yet de facto several of the policy entrepreneurs studied here may also be defined as norm entrepreneurs.

Relations with member states is a term that covers which states are members of the institutions, how the member state representatives arrive at decisions (voting or consensus), the ministries that represent the states vis-à-vis the institutions and the degree of autonomy of the institutions’ bureaucracy vis-à-vis the member states. It is relatively straightforward for a member state to induce institutions to address an issue (unless other member states veto such efforts, as Saudi Arabia did in the case of fossil fuel subsidies prior to 2009). Yet their ability to prevent the institution from addressing an issue and shape how the institution addresses it depends on its autonomy (discussed later in this section). Membership in terms of which states are members is relevant, since the aggregate state preferences and power constitute one factor shaping the institutional output (Zürn and Faude, 2013). The G20 covers twenty of the world’s largest developed and emerging economies, OECD covers only developed countries and while the IMF covers most countries, its voting rules grant the major developed countries a position close to a combined veto power, with the United States according to some scholars having an influence beyond its share of votes (Stone, 2008). This is because the IMF arrives at decisions through voting, with voting rights reflecting a country’s share of the global economy, while the G20 and the OECD member states arrive at decisions through consensus. The question of which ministries represent the member state may also matter (Raustiala and Victor, 2004; Skovgaard, 2012), since different ministries are characterised by different objectives and worldviews (Allison and Zelikow, 1999). For instance, finance ministries promote fiscal balances and growth and see the world through an economic lens (Seabrooke, 2011; Skovgaard, 2017b; Wildavsky, 1986), and environment ministries promote environmental protection (Weale et al., 1996).

Regarding autonomy, principal–agent theory (relevant only to IO bureaucracies) focuses on the role of these bureaucracies in terms of their status as agents contracted by the principal (the member states) to perform a function that will benefit the principal, and on the IO’s degree of autonomy from principals (Hawkins et al., 2006; Nielson and Tierney, 2003). The member states constitute one collective principal that delegates the task of addressing an issue to the agent (the IO). The more autonomy the agent has, the more it can act independently of the principal and produce output that differs, even contradicts, the preferences of key member states or even the principal as a whole.

The autonomy of an IO is operationalised in terms of the control over resources, involvement of member states in the decision-making process and specificity of its mandate (Bauer and Ege, 2016; see also Chapter 3). An IO that has considerable resources and controls how they are raised has more autonomy to take up new issues and address issues in ways deviating from the principal’s preferences than an IO that needs to have its use of resources approved by the principal. Likewise, an IO that may produce output independently of its principal has more autonomy than one in which the principal is closely involved in the production of output and that needs approval by the principal of the output. Often, the IO may produce two kinds of output: one that is produced solely by the IO bureaucracy and another which requires the approval and sometimes the active co-production of member states. The key question is then how important the outputs from the two streams are compared to each other, and how closely involved the member states are in the second stream, for example, whether they just need to approve the output or if they are involved in the decision-making process from an early stage. Furthermore, an IO with considerable degrees of freedom in its mandate, for example, to interpret the issues that fall under its portfolio, has more autonomy than those with a very specific mandate. In conclusion, the degree of IO autonomy acts as a scope condition for the influence of both the institutional worldview and policy entrepreneurs within the institutions’ bureaucracies. The IMF worldview and policy entrepreneurs would be more capable of influencing institutional output than the OECD worldview and policy entrepreneurs, since the IMF controls its own resources and operates more independently of the member states than the OECD (Busch, 2009; Dreher and Vaubel, 2004).

Interaction with other institutions covers both the interaction among the institutions studied in the book (e.g. the OECD fulfilling secretariat functions for the G20; Hajnal, 2019) and with other institutions, especially the United Nations Framework Convention on Climate Change (UNFCCC) and the World Bank. The literature on the dyadic interaction between institutions (Oberthür and Stokke, 2011; Stokke, 2001, 2012), and on the fragmentation and coupling of institutions into institutional/regime complexes (Biermann et al., 2009a; Keohane and Victor, 2011) rests on the assumption that international institutions cannot be understood without including their relationships with other institutions. The same goes for the literature on interaction among IOs (R. Biermann, 2008; Kranke, 2020; Momani and Hibben, 2015). Interaction with other international institutions influences when and how an institution addresses climate issues. The mechanisms through which institutions are influenced by other institutions are similar to the mechanisms through which they influence other institutions, as discussed in Section 2.4. Thus, the approach adopted here is similar to the literature on dyadic interaction (Gehring and Oberthur, 2009; Oberthür and Stokke, 2011), except that I disaggregate this interaction to distinguish between the influences affecting the institutions studied here and the influences they exert influencing others.

The mechanisms include ideational change, as well as changes to incentive structures and to agenda-setting. Ideational change includes changes to the ideas within the institutions, including both cognitive and normative dimensions. As such, it may alter the ideas held by individuals within the institution (be they IO officials or member state representatives) as well as ideational environments within the institution (whose ideas are considered relevant and appropriate). The ideational environment is more institutionalised within IOs, and an IO may (to a larger degree than a forum such as the G20) be less receptive to new ideas stemming from another IO with a diverging worldview (Biermann, 2008; Momani and Hibben, 2015). In the case of cognitive ideas, this includes the provision of new knowledge or learning processes in which cognitive ideas framing fossil fuel subsidies and climate finance are changed or introduced (see also Gehring and Oberthur, 2009). Changes to the normative ideas within the institution include inter alia the institution in question accepting new normative ideas or being socialised into a norm promoted by another institution (on socialisation, see Checkel, 2005). Changes to incentive structures consists of changes to incentives facing the actors within one institution originating from another institution, including the transfer of resources, pressure to address an issue in a particular way or agreements made within one institution influencing the willingness to compromise in another institution (see also Zelli et al., 2020). For instance, IOs may receive more resources, or a commitment made within one institution inducing the member states of that institution to push for similar commitments within other institutions. Finally, agenda-setting concerns actions from one institution influencing the priority given to climate finance or fossil fuel subsidy reform by another institution, for example, the G20 tasking another institution to provide an analysis of climate finance or fossil fuel subsidies.

Regarding the factors shaping the alignment among the institutions, the same factors are relevant. Generally speaking, the more similar the factors shaping the output of the individual institutions, the more synergistic they will be; for example, if their worldviews are very similar and in all institutions play an important role in shaping their output, it will pull in the direction of more synergistic alignment. Interaction among institutions plays a particularly important role in encouraging the institutions to adopt similar positions. Moreover, interacting with other institutions than the ones studied here (e.g. the World Bank, the International Energy Agency) may lead to similar positions if they interact with the same set of institutions, and to divergent positions if they interact with different sets of institutions.

2.4 Consequences of IEI Output

The output of the institutions may have different consequences for actor behaviour, what is referred to as outcome. These consequences play out differently at the domestic and the international levels.

2.4.1 International Consequences

At the international level, the focus is on the influence of other intergovernmental institutions rather than on private or public-private institutions (see Betsill et al., 2015; Chan et al., 2015 for examples of literature on the interaction between intergovernmental and private and public–private institutions). The interaction covers influences on the other institutions studied here as well as on other institutions such as the UNFCCC or the World Bank. The mechanisms through which the institutions studied influence other institutions are similar to the mechanisms through which they are influenced by other institutions. Hence, the mechanisms include ideational change (cognitive and normative), changes to incentive structures (altering the incentives for actors within other institutions for particular actions) and agenda-setting (moving the issues up or down the agenda), as discussed in Section 2.3.

2.4.2 Domestic Consequences

At the domestic level, states are the main target of their output, and consequently the kind of actors that are most directly influenced by the output. Other actors, particularly companies and NGOs, may also change their behaviour as a result of the output of institutions, but most of these changes in behaviour stem from changes in state behaviour, for example, the state changing a policy due to institutional output such as norms or commitments (on the central role of the state, see Eckersley, 2004; Setzer and Nachmany, 2018). Direct influences from institutions to non-state actors are – at least regarding the topics studied here – less important, and hence the focus will be on the influence on state policy. This influence includes studying the more indirect influences the institutions may have on state policy via the agency of non-state actors, for example, by making it possible for them to shame the state for not living up to international commitments.

The focus is on the individual institutions’ interaction with selected countries, viz. Denmark, India, Indonesia, the United Kingdom and the United States. I draw on existing frameworks to compare different mechanisms of influences from the international to the domestic level (Dobbin et al., 2007; Knaggård et al., 2016; Marsh and Sharman, 2009; Simmons et al., 2006) to identify four causal mechanisms of influence: cognitive change, normative change, changes to incentive structures and changes to agenda-setting. Studying these influences requires a focus on their impact on policy processes and policy debates (e.g. Kingdon, 2003; Sabatier and Weible, 2014) concerning climate finance and fossil fuel subsidies respectively, including the actors within this process and the setting in which they operate. A key assumption is that domestic policy is created through policy processes, in which different sets of governmental and non-governmental actors (different ministries and agencies, politicians, interest organisations, NGOs, etc.) seek to influence policy so it reflects their preferences. These actors have to operate within the formal structures of the policy process (e.g. who has access, who is authorised to draft proposals or to reach final decisions, etc.). They also have to operate within informal, ideational structures, which shape which cognitive ideas are considered relevant and valid, and which normative ideas are considered legitimate (Bakir, 2009). These ideational structures range from fundamental ideas that are difficult to change (e.g. about the role of markets) to more specific and malleable ideas that are often rooted in the fundamental ideas (see also Jenkins-Smith et al., 2014). The different actors have different resources in terms of formal authority, financial resources, ability to mobilise public opinion and/or activists, and so forth.

As with the discussion of institutional output and of the causes of the output, I distinguish between cognitive and normative change, although in practice they may be difficult to disentangle. Both of these kinds of ideas may be internalised by actors as well as act as external constraints or resources for actors that do not internalise them. Importantly, new ideas that resonate with existing ideas and fundamental ideational structures (see Section 2.3) are more likely to lead to ideational change (Jenkins-Smith et al., 2014). As mentioned, these ideas can operate externally of the beliefs of policymakers, but still be something they have to take into account, or policymakers can internalise them and take them for granted (Checkel, 2005). The book focuses mainly on the institutions influencing policymakers directly, since this is the main channel of interaction for the three institutions. There is a particular focus on the officials who interact directly with the institutions, for example, finance ministry officials. Identifying the institutions’ more indirect cognitive and normative influences on policy by affecting actors outside the policy process, for example, academics, think tanks or NGOs, is difficult, mainly because it is difficult to distinguish these influences from other influences on these actors. Yet the book also includes influences on the public and decision-making agenda, as discussed later in this section.

Cognitive change describes the provision of knowledge (including data) about the issue, including learning about how other actors have addressed the two issues and the lessons that can be derived from these experiences (e.g. successful cases of fossil fuel subsidy reform in other countries). Such knowledge concerns both the room for manoeuvre of actors to influence decision-making and how actors perceive the world. Thus, cognitive change may influence the framing and definitions used to address climate finance and fossil fuel subsidies, for example, debates regarding which definition of fossil fuel subsidies should be used to determine whether a country has subsidies (Koplow, 2018; Skovgaard, 2018). Such changes to cognitive ideas also include learning, understood as changing beliefs concerning the ‘best’ (generally most efficient or effective) way to achieve an objective based on experience, in this case that of other actors (Dobbin et al., 2007; Dolowitz and Marsh, 2012; Dunlop and Radaelli, 2013). Here, it is pertinent to focus on international institutions actively disseminating best practices (see Lehtonen, 2007 and Seabrooke, 2012 for the OECD and the IMF respectively) or acting as forums for peer-based learning (from both successful and unsuccessful reforms) among policymakers (Haas, 2000).

Normative change refers to changes in policymakers’ normative ideas regarding the two issues, for example, the socialisation of officials into the norm that climate finance constitutes a way of addressing the risks associated with climate change. The internalisation of norms takes place via actors (often gradually) becoming convinced about its validity, for example, through normative suasion (Checkel, 2005). Concerning normative ideas as external, actors may be bound by previous commitments to normative ideas they do not believe in (e.g. the norm of pan-European liberalism; see Schimmelfennig, 2001) or strategically use such ideas to convince or constrain other actors (e.g. the norm of liberal internationalism; see Hurd, 2005). The spread of a normative idea within a country generally follows a pattern in which it is first internalised by a small set of actors, who are persuaded by its validity, followed by a ‘cascade’ in which the idea becomes established within the entire policy subsystem or society as something actors need to take into account whether they believe in it or not, and in the final stage acquires a ‘taken-for-granted’ quality that nobody questions (Finnemore and Sikkink, 1998). Norms and other normative ideas may be subject to contestation regarding their general appropriateness or validity, as well as regarding their application to specific situations (Wiener, 2004; Zimmermann et al., 2017).

Changes to incentive structures refers mainly to the effects of commitments (e.g. to undertake fossil fuel subsidy reform or provide climate finance) and conditionalities (e.g. cessation of IMF loans if countries do not reform fossil fuel subsidies) on the non-ideational structures facing domestic actors involved in how their country addresses fossil fuel subsidies and climate finance. It also refers to new knowledge about the credibility of other states' commitments or offers. These changes may work by influencing the power of these actors by providing them with (or withdrawing) material support or altering their power vis-à-vis other actors by providing them with powerful new international allies that seek the same objectives as them, for example, fossil fuel subsidy reform. The power of international economic institutions is well documented, particularly the influence of the IMF and World Bank programmes⁴ (Pop-Eleches, 2009). Changes to incentive structures may also induce actors to change their positions on policy issues by increasing the costs or benefits (for them specifically or for the country as a whole) of particular policies (Kahler, 2000). The failure to adhere to commitments to, for example, fossil fuel subsidy reform, may result in IMF loans not being delivered, or low delivery of climate finance highlighted by OECD reporting may result in reputational costs influencing international cooperation on other issues, cooperation that directly benefits the country.

Agenda-setting refers to changes to the public (e.g. the degree of attention to the issues in the media) and decision-making agendas (e.g. debates within parliament or the government). Reports, statements or commitments by the institutions affecting the place of fossil fuel subsidies on the public (media) and policymaking (within government, parliamentary committees, etc.) agenda constitute the most relevant agenda influences. Such influences allow actors favouring a particular policy change to initiate a debate about the policy, for example, whether the country has fossil fuel subsidies and whether they should be reformed. In this way, agenda-setting may support cognitive or normative change (e.g. framing a policy as a fossil fuel subsidy), or changes to incentive structures. Likewise, changes to the position of the two issues on the agenda may be influenced by cognitive, normative or incentive-based changes.

2.5 Summary

The framework outlined in the preceding text is useful for exploring the institutions’ handling of fossil fuel subsidies and climate finance, including the economisation in the shape of their output, and the alignment, causes and consequences of this output. The framework includes reoccurring themes, most notably cognitive, normative and incentive-based dynamics. For instance, the framework may identify whether output in the shape of commitments with a distinct normative dimension (e.g. promoting a norm) have been driven by particular normative factors and have particular normative consequences. The framework will be important for the study of economisation, since it allows one to study how economisation has taken place (including variation between institutions) and the causes and consequences of economisation in its different shapes.

3 The Three Institutions, Their Roles and the Environment

The three institutions studied were all founded to deal with economic issues and to promote economic growth and stability. While this raison d’être and a broadly economic worldview are shared characteristics among them, they differ in terms of governance functions, organisational set-up, worldview, membership and decision-making procedures, interaction with other institutions, environmental track record and in the case of the OECD and the IMF also the autonomy of the International Organisation (IO) bureaucracy. The G20 is an informal forum for the most powerful state leaders and finance ministers in the world, the OECD is a key producer of (often quantified and economic) knowledge about all sorts of policy issues and the IMF is one of the most powerful IOs in the world as regards shaping national policy. To analyse economisation in the shape of how the institutions have addressed fossil fuel subsidies and climate finance, it is necessary to understand their background and how they align in terms of these factors. The factors may explain differences and similarities in their economisation of the two issues, as explored in the subsequent parts of the book. This chapter describes the three institutions individually, starting with the G20, followed by the OECD and the IMF. For each institution, the chapter outlines their history, governance functions, organisational set-up, worldview, membership and decision-making procedures, interaction with other institutions, environmental track record and for the OECD and the IMF also the autonomy of bureaucracies.

3.1 The G20

The G20 was established in 1999 primarily to deal with economic issues. Following the 1997–8 Asian financial crisis, several countries wanted a forum that was smaller, more informal and flexible than the UN institutions, while it at the same time included the larger emerging economies, unlike the Group of Seven (G7)¹. Initially, the G20 was a forum of finance ministers and central bank governors, but since 2008 the state leaders have met annually and the G20 process has been driven by them rather than the finance ministers and central bank governors. Its membership consists of nineteen of the thirty-three largest national economies (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States), and the European Union.² Permanent guest invitees are the IMF, the OECD, the Financial Stability Board, the International Labour Organization, the UN, the World Bank Group, the World Trade Organization, the African Union, the Asia-Pacific Economic Cooperation (APEC), the New Partnership for Africa’s Development (the last three represented by the country holding the annually rotating presidency) and Spain. Other countries have been invited as non-permanent guests.

3.1.1 Governance Functions

The G20 is a forum for discussions on all sorts of international issues from violent conflicts to sustainable development, yet its original raison d’être – coordination of economic policy – is visible in its prioritisation of issues and their economic impact. During the first phase of the economic and financial crisis in 2008–9, the G20 emerged as the global forum for the coordination of economic policy (Barbier, 2010; Van de Graaf and Westphal, 2011). The G20 formal output is mainly declaratory and to some degree regulatory, consisting of joint statements, commitments, communiqués and reports. The statements and commitments may commit member states to particular actions (e.g. reforming fossil fuel subsidies), but do not contain legal obligations or sanctions in case of non-adherence. The G20 is an informal institution characterised by face-to-face interaction in small in-camera groups (Kim and Chung, 2012). Consequently, it also provides important informal output in the shape of workshops and ministerial meetings constituting venues for disseminating knowledge and socialisation into norms (on in-camera settings being favourable to socialisation, see Checkel, 2005).

More generally, while the G20 functioned as a crisis committee during the 2008–9 economic and financial crisis, coordinating national responses to the crisis, it has subsequently developed into a global ‘steering committee’ (Cooper, 2010; Crump and Downie, 2018; Drezner, 2014; Held and Young, 2013). A steering committee can be understood as ‘a diplomatic device to encourage consensus between the biggest countries on major transnational issues’ (Van de Graaf and Westphal 2011: 20). As such, the G20 is used for steering and coordinating government policies through the commitments they adopt. While the steering role predominantly focuses on economic governance, particularly preventing excessive problems of global capitalism while preserving this system (Cooper, 2010) and its legitimacy (Slaughter, 2015), issues such as energy (Downie, 2015; Van de Graaf and Westphal, 2011) and climate change (Kim and Chung, 2012) have also been subject to steering. This steering role is more far-reaching and has a more long-term focus than ‘just’ being a global crisis committee. Finally, the role of the G20 is also described in terms of its ability to address issues characterised by deadlock within larger multilateral forums, particularly within the UN system, owing to its smaller and more informal setting (Cooper and Thakur, 2013; Widerberg and Stenson, 2013).

3.1.2 Organisational Set-up

The G20 does not have its own secretariat but relies on the state holding the annually rotating Presidency. The current Presidency works with the previous and upcoming Presidencies in the so-called G20 troika to ensure continuity, but only the current Presidency decides on the G20 agenda. The Presidency’s influence over the agenda is most pronounced in its authority to decide whether papers from the different tracks preparing the G20 state leaders’ summit make it to the agenda of the summit or not (Crump and Downie, 2018; Slaughter, 2017). Yet, the power of the Presidency over the agenda is not complete; for instance, the 2014 Australian Presidency was not able to keep climate change off the G20 agenda when most other G20 members wanted to address it (Pickering and Mitchell, 2017). The state leaders’ summit is the most authoritative body within the G20 and is prepared through two tracks: the finance track involving finance ministry (and to some degree also central bank) representatives and the Sherpa track involving senior advisors to the state leaders, the so-called Sherpas. These two tracks are constituted by meetings between on the one hand finance ministers and central bank governors and on the other hand Sherpas, as well as a range of expert working groups that prepare draft decisions and papers for the finance ministers (and central bank governors) and the Sherpas respectively. These expert groups are not permanent in the way OECD expert groups are, but typically last for a few Presidencies until they are no longer included in an incoming Presidency’s priorities. Generally speaking, the finance ministers and central bank governors deal with issues of economic relevance and the Sherpas with other issues. Besides these two tracks, other ministries such as agriculture, energy health and trade ministers also meet from time to time, but such meetings depend on individual decisions (mainly driven by the Presidency) and are not institutionalised in the way the finance ministers/central bank governors and Sherpa tracks are. Conclusions from ministerial meetings are notable in their own right beyond shaping state leaders’ conclusions, as they define G20 positions on issues that are not deemed sufficiently important to make it onto the limited agenda of the state leaders.

3.1.3 Worldview

Although the G20 addresses a range of issues, its original raison d’être of addressing economic issues still shapes its worldview. The G20 has prioritised economic issues and framed other issues in terms of their economic consequences (Slaughter, 2015; Van de Graaf and Westphal, 2011). Thus, the G20 focuses cognitively on the economic aspects of a given policy (for instance the economic consequences of climate change), but also normatively places economic growth and stability above other priorities, except perhaps peace. The criterion for membership of the G20 is also defined in economic terms: as being among the largest economies in the world. The worldview of the G20 is not firmly established in a bureaucracy, but in the meetings (at the state leader, ministerial as well as Sherpa and expert levels) taking place within the G20, including both the ideational environment emerging from regular interaction (Johnston, 2001) and the worldview of the government institutions the participants come from. In this respect it is important that the entire finance ministries track mainly consists of interaction between representatives of finance ministries and to some degree also of central banks. The economic worldview is also enhanced by the predominance of economic institutions among the permanent guests. Yet, there has also been significant contestation within the G20 concerning which economic ideas should prevail, reflecting that it is not a forum based on adherence to particular norms, but rather on process and on delivery in terms of steering (Cooper, 2010: 744). More specifically, emerging economies, particularly the BRICS (Brazil, Russia, India and China) have questioned the norm of free markets and have defended more interventionist approaches to economic policymaking (Chodor, 2017; Cooper and Thakur, 2013).

3.1.4 Membership and Decision-Making Procedures

The G20 members are selected primarily on the basis of the size of their economy, although countries such as Spain and the Netherlands are not members despite being among the twenty largest economies, and Argentina and South Africa are members despite being the twenty-first and thirty-third largest economies respectively. This is because regional distribution constitutes a criterion for membership besides economic performance (GLI Team, 2018). The G20 covers a greater share of global GDP (85 per cent in total) and a more diverse group of countries when compared to the G7, and is a more ‘club-like’ institution when compared to the UN (Cooper and Thakur, 2013; Van de Graaf and Westphal, 2011). A key dynamic within the G20 is the relationship between developed and developing countries, an often conflictive relationship that has led to gridlock due to disagreement particularly between the United States and emerging economies (Chodor, 2017). The G20 does not rely on voting but on consensus-based decision-making. There are de facto some member states (especially the United States but also China) that wield more influence than others due to their larger power resources, which can be used to coerce or pay off other member states (Cooper, 2010). Such power relations are more common at the ministerial, Sherpa and state leader levels than within expert groups, which are more technical than the higher-level meetings. Often issues of political contestation are left by the experts to the political actors to solve.

3.1.5 Interaction with Other Institutions

The G20 is most closely tied to the G7 but differs in that it includes emerging economies. While the G7 is a more homogeneous group than the G20, making compromise easier, it is also less representative of the world’s countries (thus reducing its legitimacy), covers a smaller share of the global economy and is less able to address issues spanning developed and emerging economies (Lesage, 2015). The G20 took over from the G7/8³ as the preeminent minilateral forum following the 2008–9 economic and financial crisis (Cooper and Thakur, 2013). Occasionally, the homogeneity of the G7/8 means that it may adopt positions or commitments that are not possible to adopt within the G20, for example, on limiting climate change to 2 degrees Celsius (G8, 2009).

The relationship with the UN institutions can be interpreted in diverging ways. Whereas G20 members often justify the forum with reference to its ability to break deadlock within UN negotiations, non-G20 countries and civil society organisations have argued that its lack of representativeness and exclusion of smaller countries greatly reduces its legitimacy (Hajnal, 2015; Slaughter, 2013). Although the G20 covers 66 per cent of the global population, Least Developed Countries are not represented in the G20, and consequently the forum has been criticised for not representing the world’s poor.

The OECD, the IMF and the World Bank have more synergistic relationships with the G20. Not only are they permanent guests at G20 meetings, they also provide knowledge input in the shape of reports and papers to the G20 and participate actively in G20 expert meetings. Likewise, the OECD is also a permanent guest, knowledge provider and active participant in G20 meetings, and often undertake secretariat functions for the G20 (Hajnal, 2019).

3.1.6 Environmental Track Record

The G20 started to address environmental issues at the official level in connection with the spring 2009 Summit in London, at which state leaders committed to a ‘green recovery’ through stimulus packages containing investments in renewable energy, energy efficiency, and so forth (G20 Heads of State and Government, 2009a). Prior to 2009, environmental issues had predominantly been discussed by senior officials. The commitment was a response to calls for a ‘green new deal’ (Barbier, 2010), amid discussions of a return to Keynesian policies following the economic crisis (Tienhaara, 2016). Nonetheless, the commitment to green recovery was not as detailed as the UK Presidency wanted it to be, and its impact on the member states’ economic stimulus packages is debatable (Tienhaara, 2016). The focus on green economic policies continued in the subsequent Korean and French Presidencies in the shape of emphasising green growth, a topic that gradually slipped down the agenda of the 2013 Russian, 2014 Australian and 2015 Turkish Presidencies (Tienhaara, 2016).

Besides green recovery/growth, climate finance and fossil fuel subsidy reform, which the G20 paid particular attention to, the G20 interest in environmental issues has largely been shaped by external events. For instance, the G20 routinely expresses its commitment to the United Nations Framework Convention on Climate Change (UNFCCC) process, and stressed sustainable development in relation to the 2012 Rio+20 Conference on Sustainable Development (G20 Heads of State and Government, 2009b; G20 Heads of State and Government, 2010a, 2010b, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019).

Concerning climate change generally speaking, spectators diverge on the track record and potential of the G20. While some argue that the G20 has led the global effort against climate change to a greater extent than the UNFCCC (Kirton and Kokotsis, 2015) or at least has had the potential to break UNFCCC gridlock (Slaughter, 2017), others have argued that G20 efforts may undermine the UNFCCC process (Eckersley, 2012). Climate change has generally been framed in terms of economic impact, as is evident in the G20 state leaders’ declaration at the 2012 Los Cabos Summit (and the 2013 Saint Petersburg Summit) that ‘Climate change will continue to have a significant impact on the world economy, and costs will be higher to the extent we delay additional actions’ (G20 Heads of State and Government, 2012, 2013, item 71).

On a related note, energy, including renewable energy and energy efficiency and their link to climate change, has also increasingly been addressed by the G20 (G20 Heads of State and Government, 2011, 2014, 2015, 2016, 2017, 2018, 2019). The notion of the G20 acting as a global steering committee for energy has been popular among some member states and Presidencies, including the 2014 Australian Presidency, although straddling the divide between energy consumers and producers has proven difficult (Downie, 2015; Van de Graaf and Colgan, 2016; Van de Graaf and Westphal, 2011). The G20 has focused on the objectives of promoting ‘transparent, well-functioning, reliable energy markets’ in terms of inter alia reducing price volatility in energy markets, improving energy efficiency and access to clean technologies, promoting sustainable development and green growth, as well as improving the global governance architecture for energy (Downie, 2015).

3.2 The OECD

The OECD was established in 1961 to promote policies improving the economic and social wellbeing of people around the world. Its predecessor was the Organisation for European Economic Co-operation founded in 1948 to manage the Marshall aid distributed to non-Communist European countries. It expanded to include Western countries beyond Europe and North America, and later post-Communist European countries and countries above a certain level of income in Asia and Latin America, specifically Colombia, Israel, South Korea, Mexico and Chile.

3.2.1 Governance Functions

The OECD does not possess instruments that can force or incentivise states to change policy in the way for instance the IMF is able to use its conditional lending, but relies on ideational (cognitive and normative) influences (Ruffing, 2010). A key component of such influence is the OECD Secretariat’s role as a producer of knowledge and data on all kinds of subjects except security, which is fed into and often produced in collaboration with issue-specific committees and working groups consisting of member state representatives. Thus, the OECD is first and foremost an institution producing knowledge in the shape of data and analysis. The knowledge aims to improve specific policies in its member states and secondarily beyond them. The OECD is one of the most important (the most important in certain policy areas such as education and development) providers of cross-country data. It also provides policy recommendations on the basis of a general analysis of a policy issue (e.g. green investment) as well as of a country-specific analysis of a member state’s policies. The OECD has also been instrumental in developing and promoting important normative ideas, notably the polluter pays principle (OECD, 1974). Furthermore, the OECD also acts as an informal venue for interaction and knowledge dissemination among member states, thus providing opportunities for socialisation and learning.

3.2.2 Organisational Set-up

The term ‘OECD’ refers to the entirety of the OECD including the OECD Council, as well as the OECD Secretariat, the international bureaucracy which is an independent actor in its own right. The OECD Council is headed by the Ministerial Council, which is chaired by one of its members on an annually rotating basis, and which meets annually to endorse a set of strategic priorities (Carroll and Kellow, 2011). Ministers from the member states also sometimes meet in sector-specific configurations, for example, meetings of the ministers of agriculture. The OECD Council also consists of the Council of Permanent Representatives (who are Paris-based and meet regularly), sector-specific Committees and their subsidiary bodies. Each Committee has a range of subsidiary Working Parties, which again have subsidiary Working Groups. For instance, the Environment Policy Committee has the Working Party on Climate, Investment and Development as one of its Working Parties. Members of the Committees come from either the member states’ permanent representation to the OECD or national ministries based in their respective capitals (e.g. the ministry of the environment in the case of the Environment Policy Committee), whereas members of the working parties and groups tend to be capital-based experts.

The OECD Secretariat is headed by the Secretary-General, currently Angel Gurría, and consists of twelve sector-specific directorates, for example, the Environment Directorate. Of these, the Economics Department is considered the most important because of its cross-cutting involvement in practically all issue areas and the emphasis on economic issues within the OECD (Lehtonen, 2007; Lehtonen, 2009). The directorates work closely with the committee system (the committees and their subsidiary groups).

The OECD’s division into sector-specific silos both within the Council and the Secretariat means there are divergent worldviews present within the OECD, especially compared to the IMF. The member state representatives in the committees, working parties and working groups often come from sector ministries (e.g. education, environment) that perceive the world through the worldview of these ministries.

3.2.3 Worldview

The different directorates of the OECD have distinct worldviews which correspond to those of their different governmental constituencies. Yet, they do not differ as much as national ministries but are influenced by the overarching worldview of the OECD Secretariat that emphasises the economic aspects and consequences of policy issues and instruments, and prioritises economic growth and development (Ruffing, 2010). Such a worldview is not surprising considering that the OECD is an institution for economic cooperation and development, and has been characterised as a focal point for the ‘growth paradigm’ prioritising economic growth as the first priority and yardstick for societies (Schmelzer, 2015). Yet, the overarching worldview means that the overarching normative emphasis on economic priorities and sector-specific priorities such as environmental protection sometimes conflict.

Regarding cognitive ideas, the overarching worldview defines economic instruments such as taxes, investment policies and deregulation as the most effective ones, and on a more fundamental level prioritises producing data that can be analysed econometrically, and highlights economic consequences (Lehtonen, 2009; Ruffing, 2010). There are differences over time as well as between directorates. In the 1970s, the overarching economic approach changed from a Keynesian emphasis on state intervention and planning to a neoclassical one emphasising free markets (Carroll and Kellow, 2011). In the Secretariat, the fragmentation or differences between directorates are also curtailed by cross-cutting expert groups as well as the recruitment process, which emphasises economic analytical skills and degrees in economics (Dostal, 2004).

3.2.4 Membership and Decision-Making Procedures

The OECD membership covers thirty-six of the richest countries (measured in GDP per capita) in the world. Notably, neither oil-producing rich countries from the Middle East nor some of the poorest EU countries (Bulgaria, Croatia, Malta and Romania) are members. New member states include countries such as Mexico, Chile and South Korea, which because of their status in 1992 as developing countries are not classified as developed countries in Annex I of the UNFCCC. Consequently, they are climate finance recipients rather than contributors and have more lenient mitigation obligations within the UNFCCC than the other OECD countries. Yet, the vast majority of the OECD member states are considered to be developed countries within the UNFCCC regime (with obligations to provide climate finance and to mitigate climate change). Altogether, while it still makes sense to speak about the OECD as the rich or developed countries’ club, there is no full correspondence between being rich and developed and being an OECD member.

The processes of adopting output by the OECD member states vary but are generally characterised by a consensual nature. The formal OECD Council output consists of three types: output only binding on member states that vote for it (unless where otherwise specified), non-binding output (the most common kind) and output concerning the internal workings of the OECD (Carroll and Kellow, 2011). In other words, member states cannot be legally bound by decisions they do not wish to be bound by, but recommendations may rely on informal mechanisms of peer-pressure and reputational costs (Carroll and Kellow, 2011). Most of the preparatory work for and the negotiations concerning Council decisions take place within the committee system, and thus contested issues are generally solved or taken off the table before the Council discusses an issue. In the committee system, issues are decided unanimously by those who vote, meaning that a member state may choose to abstain without endorsing or blocking an issue (Carroll and Kellow, 2011).

3.2.5 Autonomy

The autonomy of the OECD Secretariat is somewhat limited. In terms of resources, the OECD is funded solely by member state contributions following a burden-sharing key based on gross national product (GNP). The Council of Permanent Representatives negotiates and approves the annual budget. Consequently, the autonomy of the Secretariat is curtailed by its inability to engage in major activities that its principal does not approve of, and the risk of punishment should it contradict the preferences of several member states. Yet, the expert authority of the OECD Secretariat allows it to publish reviews and other analyses that are critical of member states. More importantly, the member states are closely involved in OECD decision-making. Secretariat staff drafts all OECD publications, which are subsequently subject to review in OECD committees, working parties and groups. The publications representing the opinion of the OECD as a whole require consensus-based approval by the member states, while those only representing the opinion of the OECD Secretariat only require approval from the Secretary-General. Yet even the publications not requiring member states’ approval are subject to discussion in committees, working parties and groups, allowing states to raise criticism of the findings, but also allowing for the naming and shaming of member states in the committees. Because of the consensual nature of OECD decision-making, it is possible for OECD Secretariat’s publications to go against the preferences of individual member states, but it is difficult to go against the preferences of most or even large groups of member states. As regards decisions not directly concerning specific publications, for example, which indicators to include in data collection, the member states generally also have substantial influence.

Finally, the OECD mandate, as stipulated in the OECD Convention, is sufficiently broad to allow the OECD Secretariat to address any issue with relevance to economic growth, trade and stability (Carroll and Kellow, 2011), as long as the member states do not object.

3.2.6 Interaction with Other Institutions

The most important institution for the OECD is the International Energy Agency (IEA), which was established in 1974 by the OECD as a response to the 1973–4 oil crisis. The original purpose was to reduce dependence on imported oil, but it has gradually evolved to address all energy issues, including energy efficiency, renewable energy, coal and gas (Lesage and Van de Graaf, 2013; Van de Graaf and Colgan, 2016). The IEA is closely linked to the OECD both formally and informally through regular meetings between the officials from the two Paris-based Secretariats. Their membership circles are also largely coterminous, with OECD membership being a prerequisite for IEA membership and with only Chile, Colombia, Iceland, Israel and Slovenia as members of the OECD but not the IEA.

The OECD Secretariat often acts as a kind of secretariat to the G20, providing analyses of key issues, including taxation and climate change, for G20 working groups and ministerial meetings (Hajnal, 2019). The OECD also interacts with a wide range of specialised UN institutions in most areas except security (which the OECD does not address), including the UNFCCC, the United Nations Development Programme (UNDP), the World Health Organization and a range of other international institutions including several addressing environmental issues. Its role as a knowledge producing institution means it provides much of the data and information shaping the output of these institutions. The interaction between the OECD and UN institutions have at times been conflictive, since the OECD represents developed countries, whereas the UN institutions represent all countries in the world, a majority of which are developing. The OECD also cooperates with international economic institutions such as the IMF, the Bank of International Settlements (BIS) and the World Bank. Finally, the OECD’s relationship with the EU ranges from the cooperative to the competitive, as the OECD covers most EU Member States and in certain areas (e.g. education statistics), the EU increasingly undertakes tasks similar to those of the OECD.

3.2.7 Environmental Track Record

OECD involvement in environmental issues dates further back than that of the G20 and the IMF. The OECD Environmental Policy Committee was established in 1970 and the Environment Directorate in 1971 and particularly the latter has played an important role in developing environmental policy both at the global level and in OECD countries by producing knowledge about environmental issues. Thus, the OECD Environment Directorate has for more than four decades been at the forefront of crafting environmental policy solutions (Bernstein, 2001). The formal OECD knowledge output on environmental issues can be divided into the informatory, conceptual and analytical (Busch, 2009: 76). The informatory output consists of publications about past, present and future environmental conditions and policies. The conceptual output develops indicators and methods for designing, assessing and testing environmental conditions and policies. Finally, the analytical output evaluates and reviews environmental policies, instruments and performances, including the regular Environmental Performance Reviews of individual member states, a cornerstone of OECD environmental policy (see also Lehtonen, 2007, 2009). The OECD has focused on a range of environmental and sustainability-related issues inter alia chemicals, waste, sustainable development and increasingly climate change.

In terms of consequences, the OECD has been important in preparing and thus shaping several multilateral environmental agreements, including the 1979 Convention on Long-Range Transboundary Air Pollution (LRTAP) and the 1989 Basel Convention on Transboundary Movements of Hazardous Waste and their Disposal (Carroll and Kellow, 2011).

From the start, the OECD has promoted the integration of economic and environmental policies (Ruffing, 2010). This promotion is evident in its development of the polluter pays principle as a way of internalising the environmental costs of production, and hence of addressing environmental issues in a way that is compatible with free markets and free trade (Bernstein, 2001). On a broader scale, the OECD has been crucial in developing the norm complex or paradigm of liberal environmentalism, which describes a normative compromise between environmental protection and economic growth, and which predicates international environmental protection on the promotion and maintenance of a liberal economic order (Bernstein, 2001). More specifically, the OECD reacted to the 1987 Report of the World Commission on Environment and Development ‘Our Common Future’ (known as the Brundtland Report) as well as other calls in the 1980s for reconciling environmental protection with economic and social development in developing countries through the concept of sustainable development. The OECD reaction consisted of interpreting the Report’s conclusions as support for market-based policy instruments to address environmental issues and for economic growth and environmental protection as being compatible (Bernstein, 2001).

More recently, the OECD Secretariat’s (OECD Secretariat, 2018) strategy for contributing to the implementation of the Paris Agreement included support for countries’ low-emissions, climate-resilient pathways and for effective carbon prices, fossil fuel subsidy reform and making finance flows consistent with the Paris Agreement.

3.3 The IMF

The IMF was founded in 1944 at the ski resort Bretton Woods, New Hampshire by a group of Allied and neutral countries to ensure the stability of the international monetary system. Its sister organisation, the World Bank,⁴ was also established with the purpose of promoting economic development. Together, the IMF and the World Bank are commonly referred to as the Bretton Woods institutions. Although the Bretton Woods institutions are formally UN specialised agencies, they differ from other UN institutions in that they allocate voting rights based on GDP, and for this reason and because of their independence vis-à-vis the UN set-up they are commonly referred to as non-UN institutions. After the 1971 collapse of the Bretton Woods financial system of pegged but adjustable exchange rates, which the IMF was supposed to maintain, it increasingly focused on providing support to countries incurring fiscal problems and on developing countries (Momani and Hibben, 2018). Following the 1997–8 Asian financial crisis, the IMF faced increased criticism regarding the usefulness of its conditionalities and the Washington Consensus (see discussion in Section 3.3.3) and its role within global economic governance decreased. Yet, following the 2008–9 economic and financial crisis, the IMF returned to its former position of strength, as evident in its central role in addressing the sovereign debt crises in Europe (Joyce, 2013).

3.3.1 Governance Functions

The IMF’s two most fundamental tasks are monitoring the economies of member states, especially their exchange rates and balance of payments, and acting as an international lender (Vreeland, 2007). Monitoring can be characterised as regulatory, and to some degree as knowledge output, and includes the so-called Article IV consultations it conducts with nearly all countries. These consultations focus on whether a country’s currency is overvalued and its exchange rate policy appropriate, and increasingly also other economic policies. Lending, which can be characterised as distributive output, takes place in countries facing a balance of payments crisis. IMF loans are dependent on a set of policy conditions that the country has to meet to receive the funds. These conditions include policy changes that will improve fiscal balances, typically in the shape of austerity policies (Ban and Gallagher, 2015; Kentikelenis et al., 2016). In practical terms, officials from the IMF and the government (typically from a finance ministry and central bank) draft a ‘Letter of Intent’ specifying what the country aims to do if it receives IMF lending. This letter is subsequently sent from the country’s head of state or government to the IMF, and thereafter approved by the IMF Executive Board (Vreeland, 2007). The conditionalities take the shape of an IMF programme. In the case of developing countries, these programmes are often developed in collaboration with the World Bank. The IMF has faced considerable criticism regarding these programmes and the policy conditions for having a negative impact on the poor and for infringing on national sovereignty. While the former line of criticism is directed at the so-called ‘Washington Consensus’ (discussed in detail in Section 3.3.3) and its focus on economic liberalisation and austerity, the latter line of criticism concerns the power of the IMF vis-à-vis national governments (Barnett and Finnemore, 2004).

Besides monitoring and lending, the IMF also provides informal output in the shape of technical and policy advice to governments (often in connection with monitoring and lending) and creates and disseminates knowledge in the shape of publications and workshops. The IMF’s Research Department is particularly important in the latter respect. Thus, the Fund’s output is mainly formal and to a lesser degree informal and focuses on the reallocation of resources and to a lesser but still important extent on knowledge production (see Section 2.1).

3.3.2 Organisational Set-up

The IMF as a whole is formally governed by the Board of Governors, consisting of one representative from each member state, with each having a different number of votes (see Section 3.3.4). The Board of Governors appoints twenty-four directors who constitute the Executive Board. The five members with the largest number of votes (the United States, Japan, Germany, France and the United Kingdom) each appoint a director, while the other member states elect the other directors, which usually represent larger groups of countries, for example, the Nordic-Baltic countries. The Board of Governors only meet annually, while the Executive Board meets several times each week and is more actively involved in the day-to-day operations of the Fund. The Executive Board also appoints the managing director, who heads the IMF bureaucracy, and always comes from Europe (owing to a compromise according to which the World Bank president always comes from the United States). The IMF bureaucracy is organised into different departments, including the Area Departments covering different regions of the world, the Functional Departments and the Information, Liaison and Support Departments. The Functional Departments include departments undertaking cross-cutting functions, such as the Fiscal Affairs Department and the Research Department.

3.3.3 Worldview

During the period from its foundation until the late 1970s, Keynesianism and its emphasis on state intervention was the main theoretical foundation of IMF policy (Momani and Hibben, 2018). From the 1980s onwards, the IMF was a stronghold of the ‘Washington Consensus’, a paradigm based on monetarist economic policy (Chwieroth, 2008). This consensus can be understood as a policy paradigm rooted in the IMF, the World Bank, the Inter-American Development Bank, the US Executive, some members of the US Congress and Washington-based economic think tanks (Babb, 2013). The Washington Consensus emphasised structural reform such as privatisation; trade, financial and labour market liberalisation; and the protection of private property rights; as well as the IMF’s traditional focus on cutting fiscal deficits (Babb, 2013). The use of policy conditionalities constituted a key component of the Consensus. In terms of economic theory, the Washington Consensus was rooted in monetarism and so-called ‘new classical economics’, which both drew on neoclassical economics and defined the market as providing the optimal solution and called for rolling back the role of the state (Momani and Hibben, 2018).

Yet, in the period following the 1997–8 Asian financial crisis, the IMF and the World Bank gradually changed their approach (Park and Vetterlein, 2010b), a change that was reinforced following the 2008–9 economic and financial crisis (Ban and Gallagher, 2015; Moschella, 2015). According to some spectators, the current IMF approach is best understood as a ‘post-Washington Consensus’ that is more open to Keynesian fiscal policies and less focused on cognitive ideas of liberalisation as creating growth and more emphasis on poverty reduction as a normative objective (Hibben, 2015). Importantly, the IMF’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability, and its objectives now is to ‘foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world’ (IMF, 2020b). How radical the changes in the approach of the IMF have been is debatable (Broome, 2015; Kentikelenis et al., 2016). The Fund has experienced radical change to ‘its views on capital controls, the reorganisation of its financial surveillance function, its interventions in the austerity versus stimulus debate, and lastly, the Fund’s views of state–creditor relations’ (Ban and Gallagher, 2015, 132). Importantly, a change to so-called revisionist macroeconomic fiscal policy (which breaks with monetarist policy in advocating counter-cyclical fiscal spending) within the Fund was possible because revisionist policy proposals were framed in mainstream academic terms, for example, by relying on macroeconomic modelling (Ban, 2015). Yet, changes in other policy areas have been more incremental. Generally, the Fund narrowed the scope of its policy interventions to focus less on sweeping structural reform, while maintaining its core focus on fiscal consolidation (Broome, 2015). Thus, the Fund focused less on macroeconomic dynamics but kept fiscal balances as a core objective and continued to adhere to the cognitive idea of such consolidation as leading to economic stability and long-term growth. Furthermore, the changes do not imply a break with normative ideas defining maximising economic welfare as the key objective and free markets as the optimal instrument to achieve this. Although other objectives such as social inequality, gender and climate change were added, they were framed in economic terms as being important due to their impact on economic growth and stability (Clift and Robles, 2020; IMF, 2015b).

The constructivist literature on IOs has placed a great deal of emphasis on explaining the IMF approach – be it in terms of a Washington Consensus or a post-Washington one – in terms of the IMF bureaucracy (Barnett and Finnemore, 2004; Chwieroth, 2008; Chwieroth, 2010). These explanations cover norm entrepreneurs as well as the worldview of the IMF (Barnett and Finnemore, 2004’ Chwieroth, 2008, 2010; Hibben, 2015; Moschella, 2015). The bureaucratic worldview has generally been described based on the normative idea of maximising (economic) welfare, and cognitive ideas defining interventions in the market (e.g. regulation) as hindering the efficiency that is key to maximising welfare (Chwieroth, 2010). Key to this worldview is the economic training of the IMF officials, which traditionally hold a PhD in economics from a leading university, typically in the Anglo-Saxon world (Barnett and Finnemore, 2004; Chwieroth, 2010). Yet, the IMF worldview is not a fixed or homogenous entity (Kaya and Reay, 2019). As mentioned earlier, Keynesian ideas stressing a more active role for the state were prevalent until the late 1970s, and to some degree influenced IMF policy trends following the 2008–9 economic and financial crisis (Momani and Hibben, 2018). Nonetheless, even after Keynesianism’s partial comeback in IMF policymaking, neoclassical economics continue to be at least as important in shaping IMF policy (Hibben, 2016; Momani and Hibben, 2018). Furthermore, much of the change in IMF policy has concerned changes to cognitive ideas regarding the causal effects of expansionary fiscal policy rather than fundamental beliefs about the effectiveness of markets, and has to a larger degree been driven by IMF top management than by an ideational change among IMF staff (Ban, 2015). Beyond changes over time, there are considerable differences between departments, with some departments, notably the Fiscal Affairs Department, being more informed by neoclassical economics (Ban, 2015; Park and Vetterlein, 2010b).

3.3.4 Membership and Decision-Making Procedures

At the time of writing, the IMF has 189 members, virtually all the countries in the world minus a few of the smallest countries (e.g. Liechtenstein, Tuvalu) as well as North Korea and Cuba for ideological reasons. Yet only 5 per cent of the votes are distributed equally, with the remainder distributed according to the size of their capital deposit or ‘quota’. Each country’s quota is determined by its economy, more specifically a combination of its GDP, current account transactions and the variability of these transactions over time as well as its official reserves (IMF, 2008c, 2017b). Consequently, the United States has the largest vote share (17 per cent of the total votes), followed by Japan, China, Germany, the United Kingdom and France with 4–6 per cent each (IMF, 2020c). The G7 as a bloc controls 41 per cent of the votes. Most decisions are reached by a simple majority of 50 per cent of the votes, but some require an 85 per cent supermajority. Yet, member states rarely vote, instead generally reaching decisions via consensus (Vreeland, 2007). What this means in terms of the influence of individual member states is debatable. Some scholars have argued that the influence of the United States greatly exceeds its share of the votes, inter alia because smaller member states fear antagonising it (Broz and Hawes, 2006; Stone, 2008). On a related note, Grigoire Pop-Eleches (2009) argues that the member states with the largest economies (including but not limited to the United States) de facto define the course for the IMF. All things considered, while the United States and other major member states are undisputedly very powerful among the member states, especially regarding discussions on the Executive Board, their degree of influence is often dependent on the context and likely to be greater, the more closely involved the Board is (Momani, 2007).

3.3.5 Autonomy

The IMF bureaucracy enjoys considerable autonomy from its member states, especially when compared to the OECD. This autonomy is based on its control over its own resources, the limited involvement of member states in the decision-making process, and its broad mandate. Regarding resources, each member state has a ‘capital subscription’ similar to a deposit in a bank account with the IMF. It is these funds that the IMF lends out. The interest rate on the loans and the profits from investing funds subsequently pays for the activities of the Fund. Hence, the IMF bureaucracy’s activities are not dependent on which activities its member states decide to fund (Barnett and Finnemore, 2004). For most other IOs, the funding of their activities come from member state donations, and consequently the member states may either collectively decide whether to fund a given activity or not, or a member state may individually decide to withhold funding if it does not approve of the IO’s policies (Graham and Serdaru, 2020).

As regards decision-making, the Executive Board approves all transfers of Fund resources to member states (especially lending), staff reports on member states, changes to member state deposits (so-called quotas) and most other major actions by the Fund (Barnett and Finnemore, 2004). Yet, publications on more general topics and of a more scientific kind (e.g. on the global costs of fossil fuel subsidies) as well as more low-key policy advice do not require Board approval. This is important, as the IMF is a large organisation covering a range of topics and virtually all countries, and although the Executive Board meets several times a week, it does not have the time to go into detail regarding all IMF activities, but instead focuses on the most important ones. The IMF staff draft all proposals that the Board discusses and decides. Although Board members on a few, politically important occasions have been involved in drafting lending programmes, and the IMF bureaucracy avoids drafting proposals that Executive Directors object to, the IMF bureaucracy has considerable discretion, especially concerning lower profile issues (Barnett and Finnemore, 2004; Momani, 2007). Not only may they define how policy issues are framed and which options are on the table, they also shape the agenda of the IMF generally and the Board specifically, and may place new items on this agenda or keep issues off it. Member states without a seat on the Executive Board have a very limited say in the activities of the IMF.

Finally, the IMF mandate both in its post and pre-2012 incarnations concerns economic policymaking without clearly demarcating its boundaries. Given that economic policymaking has profound implications for other policy areas, particularly but not limited to how fiscal policy determines the funding allocated to policy areas, the IMF staff has discretion to address all areas of domestic policy. This discretion is something the IMF staff arrived at during the 1970s, 1980s and 1990s by broadening its scope from focusing on currency exchange rates to practically all policy areas with economic implications, an expansion that relied on the argument that these policies and the fiscal deficit had a significant impact on exchange rates (Barnett and Finnemore, 2004, chapter 3).

3.3.6 Interaction with Other Institutions

The IMF’s closest partner among the international institutions is the World Bank. Together they are referred to as the Bretton Woods institutions, and their headquarters are next to each other in Washington, DC. More importantly, they share a common policy paradigm in the Washington Consensus (as well as its more recent incarnations), and both moved in the same direction after this paradigm was transformed (Babb, 2013; Park and Vetterlein, 2010b). On an even more fundamental level, their bureaucracies share similar economic worldviews emphasising economic growth and stability as normative objectives and adhering to cognitive ideas defining free markets as causing such growth. Their relationships with their principals are also similar in terms of membership circle and degree of autonomy. Finally, the two Bretton Woods institutions often collaborate closely ‘on the ground’ in developing countries, both in terms of policy conditionalities in the context of lending and in terms of more general policy advice (Kranke, 2020; Momani and Hibben, 2015). Often there is a division of labour, in which the IMF focuses on macroeconomic and fiscal issues and the World Bank on development issues and concrete projects. While IMF collaboration with the World Bank mainly concerns developing countries (which the World Bank’s jurisdiction is limited to), it has also collaborated closely with the European Union (EU) in the context of the debt crises of European countries such as Greece.

Beyond the World Bank and the EU, the Fund also collaborates with regional Multilateral Development Banks, especially within countries. The Washington-based Inter-American Development Bank in particular has also been considered a stronghold of the Washington Consensus (Babb, 2013). Other economic institutions including the OECD (Lesage and Van de Graaf, 2013) collaborate with the IMF on producing and disseminating knowledge. Likewise, the Fund has provided analyses to the G20 on a range of issues, mainly concerning economic policy coordination.

3.3.7 Environmental Track Record

Traditionally, the IMF has not paid much attention to environmental issues, and when it has done so, its approach has clearly reflected its economic worldview. From 1990 onwards, the Executive Board has induced it to address environmental issues, which has led to IMF staff defining environmental degradation as a potential threat to trade and budget balances as well as economic growth (Gandhi, 1998). IMF staff integrated environmental concerns in their interaction with states, including IMF programmes, mainly focusing on win-win situations such as phasing out subsidies to chemicals (Lindenthal and Koch, 2013). The staff also stressed Pigouvian taxes (and to some degree also reform of environmentally harmful subsidies) as the optimal solution to environmental degradation (Gandhi and McMorran, 1996). Yet, this did not lead to substantial changes to Fund policy (Lindenthal and Koch, 2013); rather, IMF staff were keen on stressing that other institutions, especially the World Bank, were more suitable in terms of expertise and a mandate to address the issue (Fischer, 1996). In 2001, the IMF set up an environmental team within its Fiscal Affairs Department to support the integration of environmental concerns in IMF interaction with states (IMF Survey, 2001). Since 2001, the IMF has increasingly focused on climate change, including its macroeconomic impact, fossil fuel subsidies and carbon pricing (Lindenthal and Koch, 2013). The Fund has recently defined the key areas in which it is addressing climate change as (1) supporting countries contemplating carbon pricing and fossil fuel subsidy reform as a means of meeting commitments under the Paris Agreement, (2) supporting vulnerable developing countries build resilience to climate change, and (3) collaborating with other institutions on improving climate-related regulation of finance and insurance (IMF, 2019 g, 2019h).

Nonetheless, the Fund has continuously been criticised for the negative environmental consequences of its policy conditionalities and advice. This criticism has focused on its advice and conditionalities inducing (especially heavily indebted) countries to commercially exploit natural resources, including rain forests and mineral resources, and to cut expenditure on environmental protection (Harvey, 2005; Le Prestre, 1989; Shandra et al., 2011). On a more fundamental level, the Fund has been criticised for its role in promoting the Washington Consensus that has led to less interventionist, more market-based policies and in general to a globalised economy in which emissions-intensive industries have moved to developing countries (Paterson and P‐Laberge, 2018).

3.4 Summary

This chapter has outlined the differences and similarities between the three institutions that may be relevant for how they have addressed the two issues. Most fundamentally, the institutions differ in the governance functions with the G20 as a political forum for discussion and steering national policies, the OECD is a knowledge provider and the IMF is an operational institution carrying out its own policies. The organisational structure of the three institutions also varies considerably, with the IMF and the OECD having bureaucracies, and the G20 being a forum. Furthermore, the IMF bureaucracy has considerably more autonomy than the OECD’s. They also differ in terms of membership, with the G20 covering twenty of the world’s largest economies, the OECD all developed countries and the IMF virtually all countries. In relation to this, the G20 and the OECD use consensus-based procedures to reach agreement and the IMF’s voting procedures are based on countries’ financial contributions. Finally, the OECD has a more extensive track record regarding environmental issues than the other two institutions.

In terms of similarities, all three share a worldview that focuses on the economic aspects of problems and defines economic growth and stability as key issues, but where the IMF is more strictly focused on economic objectives. The institutions also interact to a large degree with a similar set of institutions, including each other and the World Bank, while relations with the UN institutions are sometimes conflictual. All of these factors are relevant for how the economic institutions have addressed the two issues as economic issues, that is, economisation. How these differences and similarities play out with regard to the way the institutions address fossil fuel subsidies and climate finance is the topic of the remainder of this book.