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Regulators and environmental groups: better together or apart?

Published online by Cambridge University Press:  09 March 2021

Ana Espinola-Arredondo ,
Eleni Stathopoulou  and
Felix Munoz-Garcia Open the ORCID record for Felix Munoz-Garcia [Opens in a new window]
Ana Espinola-Arredondo
Affiliation:
School of Economic Sciences, Washington State University, Pullman, WA, USA
Eleni Stathopoulou
Affiliation:
Department of Economics, Nottingham Business School, Nottingham Trent University, Nottingham, UK
Felix Munoz-Garcia*
Affiliation:
School of Economic Sciences, Washington State University, Pullman, WA, USA
*
*Corresponding author. fmunoz@wsu.edu
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Abstract

This paper examines green alliances between environmental groups (EGs) and polluting firms, which have become more common in the last decades, and analyzes how they affect policy design. We first show that the activities of regulators and EGs are strategic substitutes, giving rise to free-riding incentives on both agents. Nonetheless, the presence of the EG yields smaller welfare benefits when firms are subject to regulation than when they are not. In addition, the introduction of environmental policy yields large welfare gains when the EG is absent but small benefits when the EG is already present.

Keywords

abatementenvironmental groupsgreen alliancesenvironmental policystrategic substituteswelfare gains

JEL classification

Q58: Government Policy H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies L12: Monopoly • Monopolization Strategies
Type
Research Article
Information
Environment and Development Economics , Volume 27 , Issue 1 , February 2022 , pp. 40 - 66
Copyright
Copyright © The Author(s) 2021. Published by Cambridge University Press

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