COMPETING THEORIES OF DISTRIBUTIVE POLITICS

In this chapter, we analyze how Congress, influenced by the executive branch and various special interests, distributed SO2 allowances among electric utilities as an integral part of the process of crafting acid rain legislation that could pass both houses of Congress and be signed by President Bush. The environmental economics and regulation literature contains essentially no empirical work on the economic effects of alternative market-based control mechanisms on different interest groups, largely because the historical record contains few applications of such mechanisms. In particular, little attention has been devoted to how interest-group politics and associated rent-seeking behavior affect the allocation of rights to pollute in the context of a tradable-permit system. Without this type of knowledge it is impossible to understand the political feasibility of alternative control instruments or how they might be structured to have a better chance of gaining acceptance in the political process. The ability to structure market-based mechanisms for internalizing environmental externalities that are acceptable politically will depend heavily on their incidence; that is, on their effects on different interest groups who are represented in one way or another in the branches of government that ultimately make policy decisions. Whenever valuable property rights are created by legislation, the associated allocation decisions are likely to be highly politicized in much the same way as is tax legislation or appropriations bills. Understanding better how the political process deals with such issues, in which costs and benefits are distributed among the population, can help in designing environmental control programs that are politically acceptable as well as theoretically appealing.