International Environmental Policies and Environmental Lobbying in the Presence of Eco-industry
This paper analyses the political economy of environmental policies in the presence of an eco-industry pressure group. Previous studies have dealt with two types of lobbies: capitalists and environmentalists. We introduce a third pressure group representing the eco-industry sector. Under this type of economy, the incumbent government maximizes its chances of being re-elected. Its objective functions include social welfare as well as political contributions. The introduction of the eco-industry lobby introduces a new political contribution and modifies the incentives of the traditional lobbies. Furthermore, we underline the conditions under which environmentalists and eco-industries can become political allies. We also explain that, considering the overall profit of a vertical structure, an industrial lobby group can be favourable to a more stringent environmental policy. Next, we assume an open economy. In two countries, two polluting sectors are subject to an environmental policy. Therefore, an eco-industry sector which supplies pollution abatement goods and services arises. Abatement goods and services are assumed to be internationally traded, creating the only industrial interaction between both countries. The pollution, which can be transboundary or purely local, affects consumers in both countries; we analyse both cases. Our main findings can be summarized as follows. First, eco-industries lobby in favour of more stringent environmental policies, except if the impact of foreign competition more than compensates the turnover increase induced by a tighter environmental policy. Polluting firms always lobby against tighter environmental policies. However, an industrial pressure group, representing the industry as a whole and considering upstream and downstream profits, can sometimes be favourable to an increase in the environmental policy, as it leads to increased profits. We also show that an environmental pressure group can ask for a decrease in the environmental policy at home to decrease pollution abroad. This result does not rely on interactions between countries within the polluting sector. Interaction within the eco-industry sector is a sufficient condition for demonstrating that environmentalists can be favourable to a decrease in the local environmental policy. The impact of lobbying activities on the politically optimal environmental policy is ambiguous and depends on the relative concentration of each pressure group. Keywords: political economy, eco-industry, pollution abatement subsidies JEL classification: F12, H23, Q58
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maia David & Bernard Sinclair-Desgagné, 2010.
"Pollution Abatement Subsidies and the Eco-Industry,"
Environmental & Resource Economics,
Springer;European Association of Environmental and Resource Economists, vol. 45(2), pages 271-282, February.
- Maia David & Bernard Sinclair-Desgagné, 2010. "Pollution abatement subsidies and the eco-industry," Post-Print hal-01172938, HAL.
- Joan Canton, 2009. "Environmentalists' Behaviour and Environmental Policies policies," Working Papers 2009.76, Fondazione Eni Enrico Mattei.
- Canton, Joan, 2008. "Redealing the cards: How an eco-industry modifies the political economy of environmental taxes," Resource and Energy Economics, Elsevier, vol. 30(3), pages 295-315, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p700. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.