Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: The political economy idea developed by Ackerman and Hassler (1981) is the starting point of this

paper. It suggested that a coalition of environmentalists and industrialists successfully lobbied the

US Congress. More strict technology-based standards for new sources than existing sources was the

resulting policy outcome serving the common interest of the coalition because it both offered a

barrier to entry for new firms and improved environmental quality. We focus both on cases from air

and water pollution in the US confirming which seem to confirm this suggestion and the case of

international climate negotiations and the promotion of wind-based energy. In the line of the

Ackerman and Hassler approach we suggest that the reason for EU eagerness to push forward

ambitious reduction target levels (and thereby promote new green industries) is a similar coalition

between industrialists and environmentalists. Such a strategy can be seen in the context of the

Bootleggers and Baptist theory developed by Yandle (1983), where the Baptists (in our case the

environmentalists) demand changes in behaviour on moral reasons. In contrast, the Bootleggers (the

producers of renewable energy), who profit from the very regulation, keep a low profile. The actual

heavy subsidisation of renewable energy sources, such as wind energy, can be viewed as a

successful policy outcome for the coalition of industrialists and environmentalists offering both

market protection and improved environmental quality. Solving the current dead-lock in

international climate negotiations across the Atlantic may well imply fighting the strong coalition of

industrialists and environmentalists. Such a political battle may turn out to be just as tough as

fighting windmills if not clearly investigated in future research.

Keywords: Political economy; technology-based standards; windmill industry; Kyoto Protocol; EU; US

JEL-codes: Q28

22 pages, January 28, 2003

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