Fighting Windmills: The Coalition of Industrialists and Environmentalists in the Climate Change Issue

This paper extends the political economy idea developed by Ackerman and Hassler Clean Coal/Dirty Air, or How the Clean Air Act became a Multibillion-Dollar Bail-out for High Sulfur Coal Producers and What Should Be Done About It. New Haven: Yale University Press], which suggested that a coalition of environmentalists and industrialists successfully lobbied the US Congress. More strict technology-based standards for new emitting sources than for existing sources was the resulting policy outcome serving the common interest of the coalition because it offered both a barrier to entry for new firms and improved environmental quality. We focus on the case of international climate negotiations and the promotion of wind-based energy. Along the lines of the Ackerman and Hassler approach, we suggest that one reason for EU eagerness to push forward ambitious reduction target levels (and thereby promote new green industries) could be a similar coalition between industrialists and environmentalists. Such a strategy can be seen in the context of the Bootleggers and Baptist theory developed by Yandle Bootleggers and Baptists: the Education of a Regulatory Economist, Regulation, 7, 12–16], where the Baptists (in our case the environmentalists) demand changes in behaviour on moral grounds. In contrast, the Bootleggers (the producers of renewable energy), who profit from the very regulation, keep a low profile. The actual heavy subsidisation of renewable energy sources, such as wind energy, can be viewed as a successful policy outcome for the coalition of industrialists and environmentalists offering both market protection and improved environmental quality. Solving the current dead-lock in international climate negotiations may well imply fighting the strong coalition of industrialists and environmentalists. Such a political battle may turn out to be just as tough as fighting windmills and needs to be addressed in future and more rigorous empirical research. At the end of the day, transparent incentives of relevant stakeholders in the climate change issue are necessary preconditions for progress in the climate change negotiations.JEL Classification: Q28,H2, H4