Abstract
Does political alignment at different levels of government influence centralized bureaucratic processes? Environmental clearances are important regulatory tools that allow governments to target the distribution of public goods/bads by both controlling negative externalities and allocating rents from project developers. While commentators advocate for central authorities to control environmental licensing of major projects, in emerging markets with weak formal institutions, it is still possible for local politicians to influence this process. We use data on environmental clearances in India for thermal (primarily coal-fired) power plants between the years 2004 and 2014 to test whether local legislators influence an otherwise bureaucratic process in which they play no formal role. Using a regression discontinuity design, we find that partisan alignment with the state chief minister results in a sharp increase in local clearance applications. This is consistent with the hypothesis that this type of political influence “greases the wheels” of bureaucracy by facilitating more environmental approvals, rather than creating regulatory bottlenecks. Our results contribute to a growing literature that suggests that lower-level politicians can still exert influence on the policy process despite having few institutionalized powers.
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Notes
“1,174 Infrastructure Projects Report Cost Overrun of Rs. 1.7 Lakh Crore.” Economic Times, December 15, 2016.
“The Bogey of Green Clearances.” CSE, October 16, 2011.
This number is consistent with general trends in India’s thermal power generation. Between 2003 and 2016, thermal power generation capacity increased from about 80 to 220 GW. There are a variety of reasons, political and otherwise, that a project that received environmental clearance might not end up being constructed, as these projects typically take several years to be implemented. Some projects, especially the “ultra mega” thermal plants, encounter fierce local opposition, while in other cases the firm concerned simply loses the necessary financing. Due to the diversity of reasons a proposed plant fails to be constructed, we focus exclusively on clearance applications and grants in this study.
These concurrent review procedures are only applicable if the proposed plant requires intervention in forested or protected areas. Only a very small proportion of all thermal projects require these additional approvals (Chaturvedi et al. 2014: 8).
Besides environmental clearances, thermal power plant projects require many other permissions. They are related to taxation, labor law, land acquisition, and fuel supply. Besides the environmental clearance, rules for land acquisition are a potentially important obstacle to development. Notably, however, these two conditions overlap as forest clearances fall both under environmental and land categories.
Smaller thermal power plants can go through the less demanding process as a category “B” project, and may only require approval by a State Expert Appraisal Committee. Our dataset includes both types of project, as even smaller plants are subject to clearance review.
Our emphasis on the MLA is not to say other players are irrelevant. Political economy analysis of regulators, cabinet ministers, interest groups, and the public all promise important insights into the political economy of regulation in India.
E.g., Anparthi, Anjaya. “MLA Parwe, others obstruct anti-plant activists.” The Times of India. (July 5, 2012); Behl, Manka. “Ecology, economy and environment to take a big hit.” The Times of India. (March 3, 2019).
Project developers can be both public and private entities. Besides NTPC (National Thermal Power Corporation), other major public developers include the power generation firms of large states, such as Maharashtra and Tamil Nadu.
Cited in Barry, Elen & Bagri, Neha Thirani. “Narendra Modi, Favoring Growth in India, Pares Back Environmental Rules.” The New York Times. (Dec. 4, 2014). https://www.nytimes.com/2014/12/05/world/indian-leader-favoring-growth-sweeps-away-environmental-rules.html
Only around 11% of the thermal project proposals in our dataset are explicitly expansions or replacements of pre-existing projects as indicated in a brief project description.
Given that India has over four thousand electoral constituencies at the state level, no particular constituency is uniquely suited for a coal-fired power plant in terms of transmission infrastructure, access to coal, land availability, and water resources.
While MLAs themselves do not have direct control over access to environmental clearances, state Chief Ministers potentially exercise a powerful sanctioning mechanism over central bureaucrats (Iyer and Mani 2012) that can act as a de facto control over the provision of services.
Note that some units received more than one application. The results in the next section are largely unchanged regardless of whether we use an indicator for the number of applications received in a period or the dummy indicator for any application as described here.
The next most common fuel type is natural gas, comprising 15% of the clearance applications in our data, with other sources making up the remaining 12%. We undertake coal-specific analysis in “Coal Plant Applications.”
Specifically, we consulted information on the http://www.greenclearancewatch.org and http://www.sourcewatch.org webpages which accumulate data on environmental clearances and coal projects in India and other countries.
This may slightly underestimate the actual construction rate as we were unable to verify outcomes for a small subset of projects that involved extremely small thermal units (typically with output of 20 MW or under) intended to provide power for a specific business (such as a textile factory).
In order to ensure that all units within the sample have a non-zero probability of being selected into treatment or control, we select only cases where exactly one of the top two vote-getters possesses the relevant characteristic.
Note that this sharp cutoff refers to the relative voteshare of the top two candidates, but the total voteshare of a treated candidate may vary as is standard in multi-cutoff designs (Cattaneo et al. 2016).
The selection of bandwidth is the subject of substantial discussion in the methodological literature on regression discontinuity designs. The Imbens and Kalyanaraman (2012) bandwidth seeks to minimize the mean squared error of the RD point estimates; other approaches make more explicit efforts to address the potential for bias in constructing a bandwidth (Calonico et al. 2014). In this case, rather than seeking to inductively identify the optimal bandwidth based on our data, we adopt the generic and transparent approach of estimating and reporting models from a wide range of bandwidths. This also helps to address the challenges produced by using an outcome variable in which positive events are rare, which may generate additional noise when the number of observations is small.
We do, however, restrict the sample to observations in which only one of the top two vote-getters was politically aligned with state government (e.g. one aligned candidate and one non-aligned candidate). In other words, we include only units that were eligible—in theory—to be assigned to both “treatment” and “control.”
The added noise may follow in part from the reduced number of positive outcomes in the sample, as roughly 62% of our sample had received clearances at the time of data collection.
That the effect sign changes along with bandwidth may be interpreted as a null result. An alternate interpretation might be that in constituencies with especially close elections, applications decrease during the last years of a term due to expectations that the incumbent might lose in the approaching contest. For somewhat “safer” seats (i.e., as bandwidth increases), applicants may feel more confident the administration will last into another term.
Though natural gas plant proposal generally skew slightly smaller than coal plants (the average gas plant proposed had a capacity of 780 MW, compared to 990 MW for coal plants proposed), we do not expect that this factor alone can account for the substantive difference in estimated effects. The capacity distribution across fuel types is generally fairly comparable (see Fig. A5 in the Appendix). Roughly 30% of natural gas plants proposed were larger than 1000 MW and ranged up to 7200 MW—the largest plant proposed in our dataset. In the Appendix Section A3.2, we further explore potential size-based treatment effects.
If units are able to partially sort around the discontinuity threshold (that is, manipulate the results of very close elections), it may bias the results. To test whether a possible discontinuity around the cutoff biases results, we drop the closest observations and compare the results.
India has a large number of political parties and there is substantial variation in terms of the number of competitive parties within a district. A narrow vote margin between the top two candidates may therefore reflect a head-to-head contest where one candidate receives 51% of the vote to the other’s 49%, or it may reflect a more open competition in which the winning candidate narrowly beats out two or more competitors.
In Fig. 2, the estimate at the widest bandwidth of ten percentage points includes more than 2400 observations out of the total sample of 6137.
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Acknowledgements
We thank Jameson McBride and Eli Birgé for research assistance. We are grateful to seminar audiences at Georgia Institute of Technology and Columbia University for thoughtful comments. A replication archive is available at https://doi.org/10.7910/DVN/SOI9ZS.
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Kopas, J., Urpelainen, J. & York, E.A. Greasing the Wheels: the Politics of Environmental Clearances in India. St Comp Int Dev 57, 113–144 (2022). https://doi.org/10.1007/s12116-021-09325-w
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DOI: https://doi.org/10.1007/s12116-021-09325-w