Saturday, March 15, 2014
Embassy (Omni Shoreham)
In this paper, I analyze rent-seeking within the context of the EU Emissions Trading Scheme (EU ETS), the largest cap-and-trade program in the world. The goal of this study is to advance our knowledge of how the institutional and political environment in different countries affects the outcome of rent-seeking processes related to environmental regulations. Using a panel dataset on industrial sectors in 24 EU member states, I examine the distribution of emissions allowance rents by government regulators to those sectors (at a non-trivial price, these allowances represent substantial economic rents). As my dependent variable, I construct a relative allowance rent measure for every industry and my independent variables are a variety of country-specific measures of political and institutional characteristics as well as several industry-level variables. Preliminary findings show that country-specific factors have a significant effect on the allocation of allowance rents. Left-leaning governments distribute larger allowance rents to their industries than centrist or right-leaning governments. Countries with a legal tradition rooted in German Law are less susceptible to rent-seeking efforts than countries with a French Civil, Scandinavian or Common legal tradition. I also find that countries with more stable political institutions seem to be more insulated from rent-seeking efforts. Finally, my results demonstrate that certain industries are able to capture higher rents than others and industries with a smaller number of plants are more successful in their rent-seeking efforts. My paper contributes to the international political economy literature by extending prior research on rent-seeking onto the area of environmental regulation.
