How should we measure environmental policy stringency? A new approach

One of the biggest obstacles in cross-country empirical research in the area of environmental economics is the absence of a sound indicator quantifying environmental policy stringency. A variety of indicators have been proposed and are currently used. Almost none of them rely on an explicitly stated methodology, violating thereby one of the most fundamental rules of index construction. To overcome this problem, this paper develops a new general methodology for the measurement of environmental policy stringency and proposes a first implementation using the example of CO2 policy stringency. To do so it combines originally extensive databases on CO2 emissions.