Scandinavian Working Papers in Economics

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

No 03-18: The coalition of industrialists and environmentalists in the climate change issue

Urs Steiner Brandt () and Gert Tinggaard Svendsen ()
Additional contact information
Urs Steiner Brandt: Department of Environmental and Business Economics, University of Southern Denmark
Gert Tinggaard Svendsen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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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