Abstract
We investigate the effect of domestic politics on international environmental policy by incorporating into a classic stage game of coalition formation the phenomenon of lobbying by special-interest groups. In doing so, we contribute to the theory of international environmental agreements, which has overwhelmingly assumed that governments make decisions based on a single set of public-interest motivations. Our results suggest that lobbying on emissions may affect the size of the stable coalition in counterintuitive ways. In particular, a powerful business lobby may increase the government's incentives to sign an agreement, by providing it with strong bargaining power with respect to that lobby at the emission stage. This would result in lower total emissions when the number of countries involved is not too large. We also show that things change radically when lobbying bears directly on the membership decisions, suggesting that both the object and timing of lobbying matter for the way in which membership decisions, emissions and welfare are affected.
Highlights
The game theory of international environmental agreements (IEAs) has already provided us with many fundamental insights
The structure of the game allows us to capture the influence of domestic lobby groups on IEA formation through their effect on domestic abatement policies, without making any a priori assumptions about the preferences they might have over coalition formation per se
Our aim has been to enrich the theory of providing international environmental goods, by considering the role played by special-interest groups in shaping policy
Summary
The game theory of international environmental agreements (IEAs) has already provided us with many fundamental insights. The game surrounds the provision of a transboundary public good, couched in terms of pollution abatement (and linked with production of a homogeneous good), while the stages are defined as follows: (i) countries decide in a non-cooperative mode whether to sign the treaty; (ii) signatories and non-signatories set their levels of abatement; and (iii) firms choose their own output by taking governments’ abatement decisions as given We combine this model with a model of lobbying fashioned after the approach of Grossman and Helpman (2001). The structure of the game allows us to capture the influence of domestic lobby groups on IEA formation through their effect on domestic abatement policies, without making any a priori assumptions about the preferences they might have over coalition formation per se In this way the abatement standard can be interpreted as a ‘political variable’, whose value is anticipated by governments when deciding whether to sign the treaty.
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