سیاست محیط زیست و اعمال نفوذ کردن در اقتصادهای باز کوچک

This paper analyzes consequences of lobby group activity for policy outcomes in economies with transboundary pollution and international environmental policies. International environmental policies are here characterized as pollution taxes determined in a negotiation between two countries. The optimal pollution taxes are characterized and comparative statics are carried out to increase the understanding of mechanisms underlying pollution taxes in the specified setup. It is found, among other things, that the presence of local lobbying may decrease, as well as increase pollution taxes – depending on, e.g. an assumption of symmetry.

When individuals are affected by political decisions, they have an incentive to try to influence the political outcome. One way of doing so is to participate in lobby groups which exercise pressure on the incumbent governments. For example, ‘green’ lobby groups may exercise political pressure to increase pollution taxes, while industry lobby groups may try to reduce costs that are associated with pollution. The number of lobby groups and the extent to which they affect the political outcome may differ both between countries and over time.1 This paper analyzes consequences of lobby group activity for policy outcomes in economies with transboundary environmental problems and international environmental policies. Consequences of environmental problems like acid rain, global warming, ozone depletion, etc. are typically not restricted to geographically predetermined regions or countries. Instead, given its transboundary nature, environmental problems often need to be solved in internationally coordinated agreements. As an example, the early emissions of sulphur and nitrogen oxides resulted, at the European level, in the formulation of the 1979 Convention on Long-Range Transboundary Air Pollution (LRTAP). As pointed out by Murdoch et al. (1997), one aspect of this particular ratification was that most countries met (or exceeded) their mandated reductions of sulphur, while not for the nitrogen oxide. As suggested by Murdoch et al. (1997), sulphur emissions appear easier to control and strategic behavior appears stronger for nitrogen oxides than for sulphur. Previous studies suggest that green lobbying leads to a stricter environmental policy at the national level. For example, Fredriksson (1997) and Aidt (1998) show that more green lobbying may lead to higher pollution taxes in small open economies with local pollution.2 Furthermore, Conconi (2003) introduces interactions between countries, such as trade and transboundary pollution, and examines how green lobbying affects policy outcomes. She shows that the impact of green lobbying depends crucially on the trade regime and on how lobby groups act together. A specific result is that one country's increase in pollution taxes, triggered by lobbying, improves the terms of trade in favor of the other country, which leads to an increase in that country's production and emissions.3 However, it is worth noting that Conconi (2003) does not consider consequences of environmental policies that are determined in a negotiation between countries, which will be the case in this paper.4 Moreover, Aidt (2005) models imperfect competition and finds that an increase in the influence from environmental lobby-groups may lead to lower pollution taxes and increased worldwide pollution. This result rests on the assumption that pollution is immobile and environmentalists care sufficiently about pollution that arises abroad. The intuition is that if environmentalists are very concerned with pollution abroad, the lobby group is willing to accept relatively more pollution at home in return for less pollution abroad, which means a lower domestic tax on pollution. The studies mentioned above are, accordingly, showing that stronger environmental lobby groups not necessarily improve the environmental quality.5 In this paper, the lobby group model of unilateral policies developed in Fredriksson (1997) is extended to include a negotiation between countries with respect to environmental policy, here defined as pollution taxes. Hence, the present paper does not focus on trade policies but instead on international environmental agreements. The present paper considers a global economy consisting of many small countries but, to simplify the analysis as much as possible, it is assumed that only two of them generate, and are affected by, transboundary pollution.6 As for real world environmental issues, this setup reflects, for example, the problem of sulphur and NOx emissions, which remain in the air for days through, e.g. acid rain and surface-level ozone and thereby may strike other countries or regions.7 The two countries are assumed to coordinate their environmental policies (taxes) via a cooperative Nash bargain, while treating the world market prices as exogenous. Although the focus on a two-country agreement is a simplification and motivated by convenience, the model may be interpretable in terms of the literature on ‘bottom-up’ agreements; see e.g. Buchner and Carraro (2005).8 The Nash bargain assumption could of course appear rather restrictive. For example, the Nash bargain is modeled so that countries, or governments, commit to its negotiated policies. In an EU context, it has been argued in the literature (see e.g. Silva and Caplan, 1997) that member countries play a Nash-type of game. That is, although countries act as leaders vis-a-vis the federal level they are endowed with equal commitment power.9 Besides, commitment power can be particularly strong for certain types of pollution (recall the discussion above). Another property of the bargaining framework is that there are no explicit informational asymmetries.10 However, given the purpose of this paper and to keep the model as simple as possible, a Nash bargaining and symmetric information seem like a natural first step to highlight mechanisms that may arise from international agreements in a lobby group framework. This paper brings together lobbying, transboundary environmental problems and an international environmental policy. Taking the political economy of trade policies as a source of inspiration, two approaches for describing decision processes in the presence of lobby groups (pressure groups) are suggested – the political competition approach and the political support approach.11 In the competition approach, parties announce policies which are evaluated by the lobby groups. The lobby groups then decide which party to support and give contributions that are, in the end, used to attract voters. In other words, it works like a competition during the election process. As for the political support approach, an incumbent government seeks to maximize its political support and thereby the probability of reelection by maximizing the welfare of society and the lobby groups. The election process itself is not considered in this case. The present paper adopts the political support approach and employs a standard menu auction model first applied in Grossman and Helpman (1994).12 The menu auction model is a suitable tool for analyzing situations where different lobby groups offer an incumbent government a menu of campaign contributions in return for a particular choice of policy. Lobby activities are assumed to be strictly national, meaning that campaign contributions are offered to the domestic government,13 and depend on domestic government policies.14 Hence, the possibility of ‘cross-national’ lobbying is disregarded in this paper. Furthermore, each government is assumed to care only about the probability of re-election, which depends on a weighted sum of aggregate campaign contributions and domestic social welfare. Lobby group formation is assumed to be exogenously determined. Specifically, some individuals overcome the free-rider problem and organize themselves into lobby groups, while others do not. This is of course a simplification, but it nevertheless keeps the model simple and isolates important mechanisms of particular interests in this paper. The assumption of lobby group formation follows much of the related literature. The negotiation between the countries is characterized as a Nash bargain with two possible outcomes facing each government. The preferred outcome to both governments is a signed contract that, by definition, renders a higher level of welfare than the no-contract outcome. If no contract is signed, each government obtains the ‘fall-back’ welfare level, which represents a non-cooperative Nash equilibrium where each government treats the policy instruments of the other country as exogenous.15 A mutually beneficial agreement itself does not necessarily guarantee that it is self-enforcing. It is worth noting that, if the political process is considered as a repeated game, the bottom-up approach may increase the credibility of the contract because a country could face a punishment in the next round of negotiations. This paper does not intend to give a full picture of a real world policy scenario. Instead, its novelty is the way it isolates and presents mechanisms that arise from a specific bargain process in a given lobby group framework. The paper is organized as follows. Section 2 describes the model and its characteristics. Section 3 defines and explains the political process. The main results are presented in Section 4, while Section 5 summarizes and discusses the results.