Rent-seeking and grandfathering: The case of GHG trade in the EU
AbstractThe EU Commission has recently proposed a new directive establishing a framework for greenhouse gas (GHG) emissions trading within the European Union. The idea is to devalue the emission quotas in circulation by the year 2012 at latest, so that the EU will meet its Kyoto target level of an 8% GHG reduction. Our main question is whether the final choice of allocation rule can be explained by potential industrial net winners involved in the policy making process. We answer this question by using rent-seeking theory and by analysing the Green Paper hearing replies from the main industrial groups. In other words, we want to explain and observe how rent-seeking (or lobbyism) affects the de-sign of environmental regulation and energy policy in favour of well-organized industrial interest groups. We argue that some firms are likely to reap a net gain from being regulated by a grandfathered emission trading system. This is so be-cause total costs of emission reduction and lobbyism are likely to be smaller than the total rents from having this type of regulation.
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Bibliographic InfoPaper provided by University of Southern Denmark, Department of Environmental and Business Economics in its series Working Papers with number 35/02.
Length: 31 pages
Date of creation: Sep 2002
Date of revision:
Rent-seeking; lobbyism; grandfathering; greenhouse gases; Kyoto Protocol; emission trading; EU;
Find related papers by JEL classification:
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
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