Limiting political discretion and international environmental policy coordination with active lobbying

Abstract

We address two concerns: trade liberalisation may lead to a race-to-the bottom in environmental standards; supra-national agencies, who might overcome this, may be captured by special interest groups. This raises two sets of choices: whether to set environmental policy at the national or supra-national level, and whether to limit political discretion by agencies. In Johal and Ulph (2001a) we showed that policy should always be set at the supra- national level, whether or not political discretion was limited, and that it would never pay to limit political discretion at the supra-national level unless it was also limited at the national level. In that paper there were exogenous probabilities of agencies being captured by one group or another. In this paper the probabilities of capture depend on the lobbying efforts of interest groups. We show that the results of Johal and Ulph (2001a) are robust to the introduction of active lobbying. Keywords; strategic environmental policy, international policy coordination, supra-national agencies, special interest groups, lobbying, limiting political discretion, constitutional choices JEL classification: D72, F02, F12, F18, Q28