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The Political Economy of Climate Change Policy in the EU: Auction and Grandfathering

Author

Listed:
  • Urs Steiner Brandt

    (Department of Environmental and Business Economics, University of Southern Denmark)

  • Gert Tinggaard Svendsen

    (Department of Political Science, University of Aarhus)

Abstract

Based on the political support function model by Hillman (1982), we consider the choice of policy instruments in environmental regulation. More specifically, we extend the Hillman model so that it can incorporate the connection between the relative strength of lobby groups, the chosen level of regulation and the choice of instrument to facilitate the achievement of this level. We apply this model to explain the shift from auction to grandfathered emission trading in the EU. When explaining this shift in policy, we focus on climate change policy and the three main interest groups, namely industry, consumers and environ-mentalists. From a pure economic point of view, taxation or auctions are clearly preferable to grandfathering. However, from our political economy model, the opposite conclusion might emerge, suggesting the counter-intuitive result that grandfathering, compared to taxation and auction, might give a stronger pres-sure to increase the emission target level.

Suggested Citation

  • Urs Steiner Brandt & Gert Tinggaard Svendsen, 2003. "The Political Economy of Climate Change Policy in the EU: Auction and Grandfathering," Working Papers 51/03, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    • Handle: RePEc:sdk:wpaper:51
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    References listed on IDEAS

    as
    1. Boom, Jan-Tjeerd, 2001. "International emissions trading under the Kyoto Protocol: : credit trading," Energy Policy, Elsevier, vol. 29(8), pages 605-613, June.
    2. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2001. "Hot air in Kyoto, cold air in The Hague," Working Papers 22/01, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    3. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2004. "Rent-Seeking and Grandfathering: The Case of GHG Trade in the Eu," Energy & Environment, , vol. 15(1), pages 69-80, January.
    4. Brandt, Urs Steiner & Svendsen, Gert Tinggaard, 2002. "Hot air in Kyoto, cold air in The Hague--the failure of global climate negotiations," Energy Policy, Elsevier, vol. 30(13), pages 1191-1199, October.
    5. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, vol. 2(12), pages 1-25, November.

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    More about this item

    Keywords

    Political support function; political economy; environmental regula-tion; lobbyism; rent-seeking; taxation; auction; grandfathering; emission trad-ing; European Union; interest groups; industry; consumers; environmentalists;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods

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