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.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Aidt, T.S. (1997). Cooperative lobbying and endogeneous trade policy. Public Choice 93: 455–475.
APPA (1994). American Public Power Association. Brochure. Washington, DC: American Public Power Association.
Baumol, W.J. and Oates, W.E. (1988). The theory of environmental policy. Second Edition. New York: Cambridge University Press.
Becker, G.S. (1983). A theory of competition among pressure groups for political influence. Quarterly Journal of Economics 98: 371–400.
Bonner, R. (1993). At the hand of Man: Peril and hope for Africa's wildlife. New York: Knopf.
Buchanan, J.M. and Tullock, G. (1975). Polluters' profits and political response: Direct control versus taxes. American Economic Review 65: 139–147.
Buchanan, J.M. and Tullock, G. (1976). Polluters' profits and political response: Direct control versus taxes: Reply. American Economic Review 65: 983–984.
Dowie, M. (1995). Losing ground: American environmentalism at the close of the twentieth century. Cambridge, MA: The MIT Press.
Driesen, D.M. (1993). Trade as a technique, not a religion. Washington, DC: Natural Resources Defense Council.
EDF (1994). Annual report 1994–1995. New York: Environmental Defense Fund.
EEI (1994a). Statistical yearbook of the Electric Utility Industry 1993. Washington, DC: Edison Electric Institute. Published October 1994/Number 61.
EEI (1994b). Edison Electric Institute... the Association of Investor-Owned ElectricUtilities. Brochure. Washington, DC: Edison Electric Institute.
Frederiksson, P.G. (1997). The political economy of pollution taxes in a small open economy. Journal of Environmental Economics and Management 33: 44–58.
Frey, B.S. (1994). Direct democracy: Politico-economic lessons from Swiss experience. Papers and Proceedings. American Economic Review 84: 338–343.
Goffman, J. (1994). Testimony of Joseph Goffman, Senior Attorney, Environmental Defense Fund before the Subcommittee on Energy and Power Committee on Energy and Commerce.United States House of Representatives, 5 October 1994.
Goodin, R.E. (1994). Selling environmental indulgences. Kyklos 47: 573–596.
Green, D.P. and Shapiro, I. (1994). Pathologies of rational choice theory: A critique of applications in political science. New Haven: Yale University Press.
Grossman, G.M. and Helpman, E. (1994). Protection for sale. American Economic Review 84: 833–850.
Hahn, R.W. (1989). Economic prescriptions for environmental problems: How the patient followed the doctor's orders. Journal of Economic Perspectives 3: 95–114.
Hahn, R.W. (1990). The political economy of environmental regulation: Towards a unifying framework. Public Choice 65: 21–47.
Hahn, R.W. and Stavins, R.N. (1992). Economic incentives for environmental protection: Integrating theory and practice. American Economic Review 82: 464–468.
Hardin, R. (1982). Collective action. Resources for the future. Baltimore: Johns Hopkins University Press.
Hillman, A.L. and Ursprung, H.W. (1992). The influence of environmental concerns on the political determination of trade policy. In K. Anderson and R. Blackhurst (Eds.), The greening of the world trade issue, 195–220. New York: Ann Arbor: The University of Michigan Press.
Howe, C.W. (1994). Taxes versus tradable discharge permits: A review in the light of the U.S. and European experience. Environmental and Resource Economics 4: 151–169.
Kete, N. (1992). 'The U.S. Acid Rain Control Allowance Trading System' in Climate change: Designing a tradeable permit system, OECD, Paris.
Lohmann, A.S. (1994). Incentive charges in environmental policies: Why are they white ravens? In M. Faure et al. (Eds.), Environmental standards in the European Union in an interdisciplinary framework, 117–133. Apeldoorn.
Major, M.J. (1992). A trading market for pollution. Public Power July-August: 34–38.
Mitnick, B. (1980). The political economy of regulation. New York: Colombia University Press.
Mueller, D.C. (1989). Public choice II. Cambridge: Cambridge University Press.
Nelson, R.H. (1990). Unoriginal sin: The Judeo-Christian roots of ecotheology. Policy Review 53: 53–59.
Nelson, R. (1995). Sustainability, efficiency, and God: Economic values and the sustainability debate. Annual Reviews of Ecological Systems 26: 135–154.
Nentjes, A. and Dijkstra, B. (1994). The political economy of instrument choice in environmental policy. In M. Faure et al. (Eds.), Environmental standards in the European Union in an interdisciplinary framework, 197–216. Apeldoorn/Antwerpen: Maklu.
NIEP (1994). The competitive power revolution: Independent energy's expanding role in electricity generation.Washington, DC: National Independent Energy Producers. October.
NRCA (1993). The G & Ts. Brochure. Washington, DC: National Rural Electric Cooperative Association.
NRDC (1994). The power of law, the power of science, the power of people: In defense of the environment. Brochure. New York: Natural Resources Defense Council.
Oates, W.E. (1995). Green taxes: Can we protect the environment and improve the tax system at the same time? Southern Economic Journal 4: 915–922.
Olson, M. (1965). The logic of collective action. Cambridge: Cambridge University Press.
Olson, M. (1982). The rise and decline of nations. New Haven: Yale University Press.
Olson, M. (1991). Rational ignorance, professional research, and politician's dilemmas. In W.H. Robinson and C.H. Wellborn (Eds.), Knowledge, power, and the Congress. Washington, DC: The Congressional Quarterly.
Olson, M. (1993). Dictatorship, democracy, and development. American Political Science Review 87: 567–576.
Raufer, R.K. and Feldman, S.L. (1987). Acid rain and emissions trading: Implementing a market approach to pollution control. Savage, MD: Rowman & Littlefeld.
Raufer, R.K., Hill, L.G. and Samsa, M.E. (1981). Emission fees and TERA: Evaluation of policy alternatives in the twin cities. Journal of the Air Pollution Control Association 31: 839–845.
Seligman, D.A. (1994). Emissions trading: Opportunity or scam? A guide for activists. The Sierra Club, Center for Environmental Innovation. Washington, DC: Understanding Green Markets Project.
Sierra Club (1994). Save America's last wild lands.... Brochure. San Francisco: Sierra Club.
Snow, D. (1992). Inside the environmental movement: Meeting the leadership challenge. Washington, DC: The Conservation Fund, Island Press.
Stavins, R.N. and Whitehead, B.W. (1992). Pollution changes for environmental protection: A policy link between energy and environment. Annual Reviews (Energy and Environment) 17: 187–210.
Svendsen, G.T. (1995). California shows the future of electricity production in the Single Market. Energy Policy 10: 857–859.
Svendsen, G.T. (1998a). Public choice and environmental regulation: Tradable permit systems in the United States and CO2 taxation in Europe. PhD Thesis, Forthcoming. Cheltenham: Edward Elgar. August.
Svendsen, G.T. (1998b). The US acid rain program: Design, performance and assessment. Government & Policy. Forthcoming.
Svendsen, G.T. (1998c). A general model for CO2 regulation: The case of Denmark. Energy Policy 26: 33–44.
Tietenberg, T.H. (1985). Emissions trading: An exercise in reforming pollution policy. Washington, DC: Resources for the Future.
Ursprung, H.W. (1991). Economic policies and political competition. In A. Hillman (Ed.), Markets and politicians, 1–41. Kluwer: Boston.
Weck-Hannemann, H. and Frey, B.S. (1995). Are incentive instruments as good as economists believe? Some new considerations. In L. Bovenberg and S. Cnossen (Eds.), Public economics and the environment in an imperfect world. Kluwer: Boston.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Tinggaard Svendsen, G. U.S. interest groups prefer emission trading: A new perspective. Public Choice 101, 109–128 (1999). https://doi.org/10.1023/A:1018381309268
Issue Date:
DOI: https://doi.org/10.1023/A:1018381309268