Breaking ranks: business fragmentation over climate policy reforms

Patterns of business opposition and support shape the pace and scope of environmental policy reforms. This article develops a theory of firm and business coalition position-taking that explains business unity and division over environmental policy. I argue that “coalition splintering”—divergent policy positions within a business coalition—is most likely when low-adjustment cost firms are under intense pro-regulatory stakeholder pressure over an environmental issue. Pro-regulatory stakeholder pressure influences firms’ genuine preferences for environmental policy when firms see environmental regulation as reputation-enhancing for their industry, and provides reputational benefits to firms willing to take a policy position in favor of regulation. However, powerful dynamics within business coalitions encourage unified opposition to environmental policy: firms want to maintain an effective business coalition and their influence within it given their engagement in multi-domain, multi-round policy processes, and can consequently be reluctant to break ranks to support environmental policy. Unified business support for environmental policy occurs when pro-regulatory stakeholder pressure and the inevitability of policy reform shift oppositional members of a business coalition to positions of strategic support. I substantiate my theoretical model using an original case study of oil and gas company position-taking on federal methane regulation in the United States.