Limiting Political Discretion and International Environmental Policy Coordination with Active Lobbying

Abstract

One of the concerns of the anti-globalisation movement is that trade liberalisation may lead to a race-to-the bottom between nation states in environmental standards. To counter this may require action by supra-national agencies, but this raises further concerns that such agencies may be less well informed about environmental issues in nation states than national agencies, and, more significantly, may be more prone to capture by special interest groups than national agencies. This raises two sets of constitutional choices for nation states: whether to set environmental policy at the national or supranational level, and whether to take steps to limit political discretion by agencies at national or supra-national level.

In a previous paper, Johal and Ulph (2001a) we introduced a model to capture these concerns and showed that it would always pay to set policy at the federal 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 the model used in that paper, limiting political discretion would imply harmonisation of environmental policies, even if, ex post, there were differences in environmental damage costs in different countries.

However, in that paper there was no explicit modelling of how special interest groups might capture agencies — there were simply exogenous probabilities that agencies might be captured by one group or another. In this paper we extend the model of Johal and Ulph (2001a) to allow for the probabilities of capture to depend on the level of lobbying effort by special interest groups. The costs of such lobbying are treated as pure waste. We show that the results of Johal and Ulph (2001a) are broadly robust to the introduction of active lobbying. While we show that for some parameter values it would pay to limit political discretion at the supra-national level but not at the national level, these cases are relatively rare, and moreover states are almost indifferent about whether or not to limit political discretion. So it remains the case that states would never have a strong preference for limiting political discretion at the supra-national level but not at the state level.