Environmental policy contests: command and control versus taxes
- PDF / 1,788,236 Bytes
- 31 Pages / 439.37 x 666.142 pts Page_size
- 112 Downloads / 192 Views
Environmental policy contests: command and control versus taxes Daniel Cardona1 · Jenny De Freitas1 · Antoni Rubí‑Barceló1 Accepted: 8 September 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This study compares the performance of two types of environmental policy instruments (command and control and taxes on emissions) when (1) the regulator’s policy choice is sensitive to the pressure of two lobbies (environmentalist and industry) and (2) lobbies can strategically set the policy proposal they will lobby for. Due to the extra fiscal burden entailed by taxes, we find that lobbyists have more incentives to moderate their policy proposals under command and control. We show how this triggers a series of differences between these two regulatory tools in terms of expected emissions, lobbyists’ utilities, or aggregate welfare. Keywords Environmental regulation · Taxes · Command and control · Lobbying · Contests JEL classification Q58 · H23 · D72
1 Introduction Restraining polluting emissions has emerged as a mainstream concern, due to the growing interest on the decarbonization process necessary to achieve the climate stabilization objective. Two regulatory tools have been commonly used to achieve this goal: command-and-control instruments, such as non-tradable emission quotas, that fix the quantity of emissions, and taxes on emissions that affect their price.1 1 A market for emission permits could be seen as another instrument that affects prices as they will be determined by the total amount of permits. Moreover, there are other regulatory instruments that might be relevant, as an output subsidy or a refunded tax (Fischer 2011). Nevertheless, we decided to frame our analysis on the debate between command and control and taxes.
A previous version of this paper has been circulated under the title ‘Environmental policy instruments and strategic restraint: caps versus taxes’ * Jenny De Freitas [email protected] 1
Department of Applied Economics, University of the Balearic Islands, Cra. Valldemossa, Km 7.5, 07122 Palma, Spain
13
Vol.:(0123456789)
D. Cardona et al.
Academics have compared those regulatory instruments on the light of (1) their cost-effectiveness to reduce emissions (Maloney and Yandle 1984; Tietenberg 1990; Stavins 2001; Newell and Stavins 2003; Endres 2011), (2) the incentives to invest in abatement technologies (Jaffe and Stavins 1995; OECD 2001; Bye and Klemetsen 2018), or (3) their welfare effects in asymmetric information settings (Weitzman 1974; Heuson 2010). In this study, we aim to introduce a new aspect to consider in this dilemma between these two regulatory settings: their performance under the pressure of lobbies on the regulator. Evidence suggests that different regulatory systems are susceptible to be affected by lobbies. Regarding command and control, there are many examples of influences from special-interest groups. For instance, during the 1980s, the major ozone-polluting firms, led by the US firm DuPont, lobbied to limit protecti
Data Loading...
