Public interest vs. interest groups : allowance allocation in the EU emissions trading scheme


Anger, Niels ; Böhringer, Christoph ; Oberndorfer, Ulrich


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URL: http://ub-madoc.bib.uni-mannheim.de/2001
URN: urn:nbn:de:bsz:180-madoc-20010
Document Type: Working paper
Year of publication: 2008
The title of a journal, publication series: None
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: Q58 P16 C10 ,
Subject headings (SWD): Umweltzertifikathandel , Allokation , Interessenpolitik , Europäische Union
Keywords (English): Emissions trading , interest groups , regression analysis
Abstract: This paper presents a political-economy analysis of allowance allocation in the EU Emissions Trading Scheme (EU ETS). A common-agency model suggests that a politicalsupport maximizing government considers the preferences of sectoral interest groups besides public interest when allocating emissions permits. In the stylized model, industries represented by more powerful lobby groups face a lower regulatory burden, which for sufficiently high lobbying power leads to an inefficient emissions regulation. An empirical analysis of the first trading phase of the EU ETS corroborates our theoretical prediction for a cross-section of German firms, but also shows that the political-economy determinants of permit allocation depend on firm characteristics. We find that large carbon emitters that were heavily exposed to emissions regulation and simultaneously represented by powerful interest groups received higher levels of emissions allowances. In contrast, industrial lobbying power stand-alone or threats of potential worker layoffs did not exert a significant influence on the EU ETS allocation process.
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