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U.S. Interest Groups Prefer Emission Trading: A New Perspective

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  • Svendsen, Gert Tinggaard

Abstract

If there is to be environmental regulation, what kind of regulation would the main interest groups then prefer? This political distortion must be taken into account when designing future environmental regulation such as CO2 regulation. The three main interest groups in the U.S. (private business, environmentalist groups and the electricity sector) prefer a grandfathered permit market. Business is attracted by this solution because free initial distribution of permits both favours existing sources financially and, furthermore, creates a barrier to entry for new firms. Environmentalist groups have changed attitudes and promote the idea too as a way of negotiating higher target reduction levels with industry to maintain voluntary contributions from their members. Finally, electric utilities prefer a grandfathered permit market, and this step towards less planned economy may be explained by the rise of competition in the U.S. electricity sector. Therefore, it is suggested that a grandfathered permit market is a more effective policy than a tax in relation to organized interests such as industry, electric utilities and environmental organizations. In perspective, the grandfathered permit market may be mixed with the use of taxes. In the case of CO2 regulation, for example, taxes may be applied to badly organized polluters, such as households and the transport sector, because their lobbying power is weak. Copyright 1999 by Kluwer Academic Publishers

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  • Svendsen, Gert Tinggaard, 1999. "U.S. Interest Groups Prefer Emission Trading: A New Perspective," Public Choice, Springer, vol. 101(1-2), pages 109-128, October.
  • Handle: RePEc:kap:pubcho:v:101:y:1999:i:1-2:p:109-28
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    Cited by:

    1. Yu-Bong Lai, 2008. "Auctions or grandfathering: the political economy of tradable emission permits," Public Choice, Springer, vol. 136(1), pages 181-200, July.
    2. Markussen, Peter & Svendsen, Gert Tinggaard & Vesterdal, Morten, 2002. "The political economy of a tradable GHG permit market in the European Union," Working Papers 02-3, University of Aarhus, Aarhus School of Business, Department of Economics.
    3. Svendsen, Gert Tinggaard & Christensen, Jan Lien, 1999. "The US SO2 auction: analysis and generalization," Energy Economics, Elsevier, vol. 21(5), pages 403-416, October.
    4. Pablo Río & Miguel Tarancón & Cristina Peñasco, 2014. "The determinants of support levels for wind energy in the European Union. An econometric study," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(4), pages 391-410, April.
    5. Bohringer, Christoph & Vogt, Carsten, 2004. "The dismantling of a breakthrough: the Kyoto Protocol as symbolic policy," European Journal of Political Economy, Elsevier, vol. 20(3), pages 597-617, September.
    6. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 14270, University Library of Munich, Germany.
    7. Gullberg, Anne Therese, 2008. "Lobbying friends and foes in climate policy: The case of business and environmental interest groups in the European Union," Energy Policy, Elsevier, vol. 36(8), pages 2954-2962, August.
    8. Anne Gullberg, 2008. "Rational lobbying and EU climate policy," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 8(2), pages 161-178, June.
    9. Asproudis, Elias & Weyman-Jones, Tom, 2011. "Third parties �participation in tradable permits market. Do we need them?," MPRA Paper 28766, University Library of Munich, Germany.
    10. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2004. "Rent-Seeking and Grandfathering: The Case of GHG Trade in the Eu," Energy & Environment, , vol. 15(1), pages 69-80, January.
    11. Pablo Río & Xavier Labandeira, 2009. "Barriers to the introduction of market-based instruments in climate policies: an integrated theoretical framework," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 10(1), pages 41-68, March.
    12. Sonia Schwartz, 2009. "Comment distribuer les quotas de pollution ?. Une revue de la littérature," Revue d'économie politique, Dalloz, vol. 119(4), pages 535-568.
    13. Esben Bergmann Schjødt & Gert Tinggard Svendssen, 2002. "Transition to Market Economy in Eastern Europe: Interest Groups and Political Institutions in Russia," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 181-194.
    14. Elias Asproudis, 2011. "Revisiting environmental groups and members’ behaviour: budget, size and (im)pure altruism," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(2), pages 139-156, June.
    15. Daniel Halbheer & Sarah Niggli & Armin Schmutzler, 2006. "What Does it Take to Sell Environmental Policy? An Empirical Analysis of Referendum Data," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(4), pages 441-462, April.

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