The choice of environmental regulatory enforcement by lobby groups

Abstract

Across countries and regions, we observe wide variations in the level of enforcement instruments (fines and inspections) that are used to reach compliance with environmental regulations. In this paper, we study whether the differences in enforcement policies can be justified from an efficiency perspective, and if not, whether they favour the interests of certain lobby groups. We develop a theoretical model to derive the preferred enforcement policy, which is characterised from a global efficiency point of view and also from the point of view of different interest groups. Also, we explicitly allow for a non-linear deterrence effect of fines. We find that, despite the regulatory costs, green interest groups generally favour more stringent enforcement strategies with high fines and high inspection frequencies, while brown interest groups prefer laxer enforcement strategies.