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The Influence of Political Pressure Groups on the
Stability of Climate Agreements
By J.Carlos Altamirano-Cabrera Wageningen
University Hans-Peter Weikard Wageningen
University Houda Haffoudhi 7 November
University

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Structure of presentation

• Background and objective
• Methodology and features of the game
• Empirical model
• Results
• Conclusions

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Background

• Motivation (IEAs-Climate change)
• IEA should coordinate actions to tackle climate
  change
• Game theoretical analysis of IEA assume that
  governments maximize only welfare
• Evidence that political pressure groups (lobbies)
  influence environmental policy

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Background (cont.)

• Game theoretical studies on IEAs
• Hoel (1992), Carraro Siniscalco (1993), Barret
  (1994)
• Key result only small stable coalitions

• Studies on the influence of lobbies in policy
  making
• Grossman Helpman (1994), Aidt (1998), Conconi
  (2003)
• Mostly focus influence of trade on environmental
  policy
• Haffoudhi (2005) study influence of lobby groups
  on stability of IEAs

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Objective and new insights

• To develop and test a framework in which
  governments decision about participation and
  abatement in an IEA are influenced by lobby groups

• New insights
• Analyze coalition formation and IEAs from a
  public choice perspective
• Extend literature of lobbying and environmental
  policy to include IEAs
• Test framework with empirical model (12 world
  regions)

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Methodology

• Coalition formation
• Non-cooperative approach, cartel formation

• Political pressure groups
• Governments not monolithic or benevolent
• Government maximize payoff including welfare and
  lobby contributions

• Empirical analysis
• 12 heterogeneous regions, economic and
  environmental effects

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Features of the game

• Government payoff function

• Coalition formation modeled as two-stage game
• First stage countries decide on membership
• Second stage countries choose abatement
  strategies
• Test for internal and external stability

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Features of the game (cont.)

• Lobby group contributions
• Two lobby groups environmentalist and industry
• Monetary contributions from lobbies

• Solution of the game
• Singletons only maximize their own payoff
• Coalition members maximize aggregated net
  benefits from abatement plus lobby contributions

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Features of the game (cont.)

• Singletons solve

• Coalition members solve

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Empirical model

• Total discounted benefits

• Total discounted abatement costs

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Allocation of regional benefits
Eastern European countries (EET)
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Lobby preferences and contributions

• Environmentalist lobby (supergreen)
• Utility function
• Contribution function

• Environmentalist lobby (green)
• Utility function
• Contribution function

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Lobby preferences and contributions (cont.)

• Industry lobby
• Utility function
• Contribution function

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Model structure

• First countries decide on membership (4084
  different coalitions)
• For each of these coalitions
• Efficient abatement vector
• Payoff vector singletons / Payoff vector
  coalition members (including lobby contributions)
• Test for stability (internal/external)

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Results

• Singleton coalition
• With supergreen lobby, only three regions take
  contributions from industry (USA, Japan and
  EU-15)
• With green lobby, all regions take contribution
  from industry

• Stability analysis
• Grand coalition not stable
• Small stable coalition (Japan and EU-15)

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Optimal transfers

• Coalition formation and transfers
• Coalitions might be enlarged if there are
  transfers amongst coalition members
• Optimal transfer distributes coalitional payoff
  proportional to outside option
• with

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Results base case and transfers
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Results lobby contributions and transfers
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Sensitivity analysis

• Lowering parameters e and ?
• Results are robust in terms of stable coalitions,
  Japan and EU-15 still stable

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Conclusions

• Regions has different incentives to take
  contributions
• Lobby contributions help to increase modestly
  stability (without transfers)
• Large stable coalitions with an optimal transfer
  scheme
• There are not enough resources to stabilize grand
  coalition

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Future research

• Game theoretical voting model membership
  conditional to national ratification
• Include lobby competition

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Marginal political revenue (MPR)

• For regions as singletons
• No contributions
• Supergreen contributions
• Green contributions
• Industry contributions