Green Parties and the Quest for Biodiversity: The Political Economy of Fiscal Commitments in OECD Economies

Abstract

This study focuses on green parties in government and analyzes the political economy of public spending for biodiversity and landscape protection, comparing it with other environmental and non-environmental spending categories. Using panel data covering 26 OECD economies during the sample period from 1995 to 2021, we employ an error-correction approach that effectively accounts for both the presence of stochastic trends in the data and the structure of public budgets. Our findings highlight significant differences in the political economy of biodiversity and landscape protection spending compared with other environmental expenditures. Firstly, while governments under the participation of green parties generally allocate more funds to other environmental issues, the same does not hold true for biodiversity. Secondly, growth rates of other environmental expenditures increase considerably during election periods, whereas expenditures dedicated to biodiversity and landscape protection tend to shrink. Thirdly, environmental expenditures are more procyclical in comparison with public spending for non-environmental purposes, where, however, under green parties in government the cyclicality of biodiversity and landscape protection expenditure is mitigated during periods of fiscal adjustments. These results underscore the importance of establishing enhanced and counter-cyclical funding mechanisms, bolstered by support from supranational organizations, to ensure continuous and effective preservation of biodiversity.