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Lobbyism and CO2 trade in the EU

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Abstract

Has the EU Directive Proposal on CO2 trade been influenced by lobbyism and can it be improved? After hypothesizing how the EU may be vulnerable to lobbyism and why industrial groups have a strong incentive to lobby for favourable environmental regulation, we turn to empirical evidence concerning design. Here, it is possible to measure lobbyism as the difference in proposed design between the Green Paper (before lobbyism) and the final Directive Proposal (after lobbyism). Overall we suggest that this lobbyism affected the design of the EU CO2 market in favour of small-sized and well-organised industrial interest groups at the expense of the EU tax payers. Most critically, allocation of permits and enforcement issues are to be dealt with at the member state level rather than the supranational level allowing member states to favour their domestic industries. A likely market breakdown means less economic growth in the EU because the gains from free trade of greenhouse gas permits among firms in different member states disappear. Therefore, we discuss, based on the US emission trade experience, how the current design proposal can be improved.

Suggested Citation

  • Svendsen, Gert Tinggaard, 2002. "Lobbyism and CO2 trade in the EU," Working Papers 02-16, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2002_016
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    Cited by:

    1. FitzGerald, John & Bergin, Adele & Conefrey, Thomas & Diffney, Sean & Duffy, David & Kearney, Ide & Lyons, Sean & Malaguzzi Valeri, Laura & Mayor, Karen & Richard S. J. Tol, 2008. "Medium-Term Review 2008-2015, No. 11," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR11, April.
    2. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, Open Access Journal, vol. 2(12), pages 1-25, November.
    3. Hanley Nick & MacKenzie Ian A, 2010. "The Effects of Rent Seeking over Tradable Pollution Permits," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-26, July.
    4. Sven Rudolph & Friedrich Schneider, 2011. "Did the Japanese Patient Follow the Doctor's Orders? Mostly no! A Public Choice Analysis of Greenhouse Gas Emissions Trading Schemes in Japan before and after the Earthquake," CESifo Working Paper Series 3639, CESifo Group Munich.
    5. Sven Rudolph & Friedrich Schneider, 2013. "Political barriers of implementing carbon markets in Japan: A Public Choice analysis and the empirical evidence before and after the Fukushima nuclear disaster," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(2), pages 211-235, April.
    6. Frank W├Ątzold, 2009. "Explaining differences in EMAS participation rates across Europe: the importance of institutions, incomplete information and path dependence," European Journal of Law and Economics, Springer, vol. 28(1), pages 67-82, August.

    More about this item

    Keywords

    Lobbyism; CO2 trade; European Union; political economy; Kyoto protocol; burden sharing; grandfathering; auction; enforcement;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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