6.1 Introduction

At first glance, environmental policy and implementation might seem less connected to corruption than, say, military procurement, public works, or campaign financing, but in fact this policy sector highlights several of the core concerns of this book. For one thing, environmental issues are often portrayed (with varying degrees of accuracy and honesty) as pitting private self-interest against the public good – a tension built into by many corruption issues. To the extent that that view is accurate, we might expect corruption originating with interests with a stake in blocking such rules, and/or with officials willing to put their influence and delaying tactics out for rent, to impede the passage and implementation of stringent, innovative environmental standards. Moreover, while sound environmental policy can offer citizens significant benefits both tangible (better health and reduced medical expenses) and intangible (lively and attractive natural surroundings), public (cleaner air and water), and divisible (reduced risk of damage from storms), sustaining political support for environmental safeguards raises an issue we have encountered in Chapter 4: questions of trust (see, on several sorts of connections between corruption and trust, Uslaner, Reference Uslaner2017). That is particularly true for environmental policies that entail (or can be portrayed by opponents as imposing) short-term costs and inconvenience in exchange for promises of longer-term, widely shared benefits. Will the eventual benefits actually materialize? Will my neighbors and my economic competitors play by the new rules? Will the interests of ordinary citizens help shape new policies, or will business-oriented interest groups and big-money political contributors take over?

Similarly, as we have seen with other issues, environmental hazards, health risks, and associated policy questions can differ greatly from one state to the next (Pope et al., Reference Pope, Burnett and Thun2002). So can the political clout, connections, and economic significance of various “clean” and “dirty” industries. Urban and rural states’ environmental challenges and options are similarly diverse, and those issues are fought out in political arenas that differ in ways we have explored in other chapters. Therefore, in this chapter we investigate not only corruption but also questions of trust and the ways they interact to shape environmental policies and implementation across states.

Interest in the relationship between corruption and environmental policy has grown over the last few decades. Multiple studies suggest that corruption and poor institutional quality have negative effects on social welfare by weakening trust, collective action, and support for environmental policies either selectively or across the board and, similar to our findings about social distancing and compliance with stay-at-home orders issued in response to COVID-19, by reducing public willingness to engage in activities like household recycling – thereby reducing the stringency of environmental policies and access to public goods such as sanitation and clean drinking water (Davidovic, Reference Davidovic2023; Davidovic and Harring, Reference Davidovic and Harring2020; Harring, Jagers, and Löfgren, Reference Harring, Jagers and Löfgren2021; Harring, Jagers, and Nilsson, Reference Harring, Jagers and Nilsson2019: Rothstein, Reference Rothstein2021; Tacconi and Williams, Reference Tacconi and Aled Williams2020). In the United States, many polluting industries are located in states that score high on measures of corruption such as Illinois, Louisiana, New Jersey, and Alabama (Kerth and Vinyard, 2012). Meanwhile, states with high social capital and trust, such as Maine and Vermont, are among the greenest. According to a survey conducted by Kennedy (Reference Kennedy2016), 70 percent of Vermont’s population and more than 60 percent in Maine agree with the statement that environmental regulations are worth the cost.

Analysts have only recently begun to consider the joint roles of corruption and trust in the determination of public policy, and to our knowledge there has been little published research on whether the effect of corruption on public policy depends on the level of trust (an exception is Dincer and Fredriksson, Reference Dincer and Fredriksson2018). Such relationships can be complex and varying, depending upon the kinds of policy and trust in question. Social capital and trust (in particular, generalized trust, defined as trust among strangers) facilitate collective action in society, particularly among members of large organizations such as environmental lobby groups, enabling citizens and civil society groups to oppose polluting industries effectively (Knack and Keefer, Reference Knack and Keefer1997; Putnam, Reference Putnam2000; Im et al., Reference Im, Hashem Pesaran and Shin2003; Poulsen and Svendsen, Reference Poulsen and Svendsen2005; Sønderskov, Reference Sønderskov2008; Sønderskov, Reference Sønderskov2009; Chong et al., Reference Chong, Gullien and Rios2010; Chamlee-Wright and Storr, Reference Chamlee-Wright and Storr2011). Such collective action in turn reduces transaction costs because trusting people are more likely to believe others will play by the rules in person-to-person contacts.

Levels of trust, in turn, affect the relative strength of industry and environmental lobby groups. When trust is low, environmental groups with large numbers of potential members face severe free-riding collective action problems (Olson, Reference Olson1971). On the other hand, business and industry groups face significantly less challenging collective action problems when it comes to efforts such as pushing for easier monitoring and enforcement, due to high industry concentration, their more limited, focused, and mutually reinforcing agendas, and the perceived financial threats of environmental laws and enforcement. In addition, they can appeal to generalized public support for business and its claims to be pursuing economic growth, effectively engaging in what Schattschneider (Reference Schattschneider1960) called the “mobilization of bias.” Business interests are therefore relatively strong in the political process. We would expect corruption to facilitate the industry lobby’s established influence activities and to serve its economic interests by reducing the stringency of environmental policy. Environmental groups, by contrast, remain decentralized, relatively unorganized, must continually appeal for public support across a wide range of issues, and are likely to have fewer financial resources. They will thus normally have much less influence over environmental issues than industry groups, particularly when generalized trust is low.

By contrast, when the level of trust is high, environmental groups can more readily convince others of the likely benefits of their proposed policies and can engage more effectively in the policymaking process (Knack, Reference Knack, Grootaert and Van Bastelaer2002; Sønderskov, Reference Sønderskov2009). They consequently become more evenly matched with the industry. While we would expect greater corruption to increase both environmental and industry groups’ influence activities, the net policy effect of corruption would be smaller (or negligible) as the two sides would be more equal in strength and influence.

Pennsylvania, another low-trust state that scores high in corruption indices, is a good example of how corruption and trust can interact to affect environmental policy. The Center for Public Integrity’s (2015) rankings show Pennsylvania has some of the weakest campaign finance, lobbying, and ethics laws in the nation – not a surprise, to the extent that low levels of trust might lead parties, candidates, and contributors to assume that their competitors would only break or circumvent any limits that might be put in place. A different 2020 assessment gave the Commonwealth only middling marks on campaign finance regulation with a rank of 19th among the fifty states and District of Columbia (Coalition for Integrity, 2020). Those laws allow elected officials to accept unlimited campaign donations and gifts from individuals, lobbyists, and political action committees (Campaign Finance Institute, 2023). Between 2000 and 2015, most likely as a consequence of the growth of fracking in the state (Crable, Reference Crable2023), the natural gas industry quintupled its donations to political parties and elected officials; between 2007 and 2018, that spending totaled $69.6 million (Conservation Voters of Pennsylvania, 2018). Not surprisingly, in 2015, Pennsylvania had a lower effective tax rate on natural gas extraction than ten other natural gas producing states, according to the state’s Independent Fiscal Office. Moreover, Pennsylvania has some of the weakest state regulations governing the natural gas industry (Richardson et al., 2013). In all, according to a 2019 tabulation by Global Witness, Pennsylvania legislators voting in favor of HB 1100, a tax-credit bill strongly backed by oil and gas interests, received an average of $2,455 in contributions from the industry in 2018, compared to a mean of $370 for those who voted against. It is scarcely surprising that an interest group channeled more funds to lawmakers supporting legislation it favored than to those voting against. Still, the disparity and the focus on that one bill are striking, given the fact that the state’s legislators routinely consider a wide range of other issues and bills in addition to the tax credits (Global Witness, 2019).

6.2 Corruption, Trust, and Collective Action: Findings in the Literature

The theoretical literature has long suggested that corruption has a negative impact on social welfare by, among other things, reducing environmental quality (Lopez and Mitra, Reference Lopez and Mitra2000; Fredriksson and Svensson, Reference Fredriksson and Svensson2003; Barbier et al., Reference Barbier, Damania and Leonard2005; Wilson and Damania, Reference Wilson and Damania2005). Corruption enables firms to influence policy- and rule-making, to break or bend the rules, and to weaken enforcement or render it more inconsistent. Thus, the empirical literature shows that corruption results in increased deforestation and air pollution and reduces natural capital and access to public goods, as noted earlier (Fredriksson and Svensson, Reference Fredriksson and Svensson2003; Damania et al., Reference Damania, Fredriksson and List2003; Barbier et al., Reference Barbier, Damania and Leonard2005; Pellegrini and Gerlagh, Reference Pellegrini and Gerlagh2006; Cole, Reference Cole2007; Anbarci et al., Reference Anbarci, Escalares and Register2009; Barbier, Reference Barbier2010; Leitão, Reference Leitão2010; Ivanova, Reference Ivanova2011; Biswas et al., Reference Biswas, Farzanegan and Thum2012; Grooms, Reference Grooms2015).

Knack (Reference Knack, Grootaert and Van Bastelaer2002) and Sønderskov (Reference Sønderskov2009) support the notion, advanced earlier, that trust facilitates collective action in large groups. One theoretical explanation is that individuals cooperate on collective action dilemmas conditional on expecting others to also do so (Sugden, Reference Sugden1984). This has occurred through human evolution, as it was advantageous when dealing with collective action problems (Axelrod, Reference Axelrod1990; Tooby et al., Reference Tooby, Cosmides and Price2006). Another explanation is that in large-N collective action dilemmas when personal knowledge and reputation effects are limited, trust serves as an alternative source of information (Hayashi et al., Reference Hayashi, Ostrom and Walker et al1999). According to Knack and Keefer (Reference Knack and Keefer1997), trust and associated civic norms may improve the quality of government and, hence, the quality of public policies by affecting levels and types of political participation. The participation of informed voters can be an important check on politicians and improve politicians’ understanding of how different policies affect various groups. Trust and similar civic norms reduce the collective action problems faced by voters seeking to have that sort of input and to monitor politicians’ actions (see also Putnam, Reference Putnam2000). Greenpeace, Sierra Club, and National Wildlife Federation membership data for 1987 from List and Sturm (Reference List and Sturm2006) indicate that the correlation coefficient between trust and membership in these organizations, measured in terms of percentages of state populations, equals 0.6, consistent with Sønderskov (Reference Sønderskov2008). The possibility of reverse causality between greater associational activity has been tested and rejected by Uslaner (Reference Uslaner2002).

Putnam (Reference Putnam1993) provides supporting evidence from Italy: in regions with higher levels of trust, public goods are provided more efficiently. He also reports that where trust is low, citizens contact government officials primarily about narrow personal issues. In contrast, in regions where the level of trust is high, citizens are more concerned with issues affecting welfare across society. LaPorta et al. (Reference LaPorta, Florencio and Andrei1997) find that trust raises cooperation (particularly in large organizations), improves the performance of government and participation in civic and professional societies, and hence raises countries’ overall performance. Overall, in the environmental sector, corruption, trust, and related distributions of social capital are important determinants of public policy and group behavior and can significantly influence outcomes for individual citizens, and in the fifty state political arenas.

The empirical literature on the effects of trust on the environment and collective action in individual US states supports our hypothesis. Savage et al. (Reference Savage, Isham and McGrory Klyza2005) describe a rapid increase in the number of environmental groups in Vermont since 1985, which they attribute to the formation of social capital. Several case studies suggest that the levels of trust and social capital affect participation in natural resource management in the US (Breetz et al., Reference Breetz, Fisher-Vanden, Jacobs and Schary2005; Leahy and Anderson, Reference Leahy and Anderson2010), watershed management in Japan (Ohno et al., Reference Ohno, Tanaka and Sakagami2010), and maintenance of soil and water conservation projects in India (Bouma et al., Reference Bouma, Bulte and van Soest2008).

We therefore expect levels of trust to affect the relative ability of polluting industry and environmental interest groups, respectively, to influence policy outcomes – but in contrasting ways. Environmentalists, who are numerous, dispersed, and concerned with a wide range of specific issues, need higher levels of trust to form and sustain lobby groups, while industry interests can organize without such high levels of trust: they are fewer in number, which facilitates coordination, monitoring, and enforcement, and share common or similar policy goals. When the level of trust is low, polluting industry groups should therefore have the upper hand, while environmentalists will consistently find it more difficult to organize. On the other hand, when trust increases, the environmentalists are likely to gain organizational strength and influence and may eventually match their industry counterparts.

It follows that an increase in the level of corruption should reduce the stringency of environmental policy when the level of trust is low. When industry lobby groups are better able to form and act, an increase in corruption should facilitate their activities. On the other hand, when general levels of trust are sufficiently high and environmental lobby groups are better able to organize and influence policy, an overall increase in corruption – which, after all, shapes the expectations of officials as well as the tactics of lobby groups – should facilitate the activities of the environmental and industry lobby groups in a similar fashion, resulting in a small or negligible overall effect on environmental policies. In other words, the effect of corruption should decline or disappear at high levels of trust.

6.3 Empirical Analysis

To test these hypotheses, we use annual data for a panel of 48 contiguous US states for the years 1977 to 1994. While it would be preferable to have a longer time dimension extending to a more recent date, we are constrained in this case by the limits of available data on what we consider to be some of the most appropriate indicators. The time dimension of the data we do have may offer some advantages for our purposes, however, in that it reflects the realities of a phase during which emergent environmental policy questions were often handled in the political arena, rather than in the courts. (For example, see the chronology of US Supreme Court rulings relevant to climate change and the environment that appears at Justia.com (2023); that listing includes four cases prior to 1994 (including two from the first decade of the twentieth century) and twenty since that time.) Data on environmental policy stringency come from Levinson (Reference Levinson, Carraro and Metcalf2001), who constructs an industry-adjusted index of state environmental compliance costs based on the Census Bureau’s Pollution Abatement Costs and Expenditures (PACE) survey. That index accounts for states’ industrial compositions and can be used to compare regulations both across states in a given year and within states over time.Footnote ¹ As our measure of corruption, we use CRI. Finally, we follow Putnam (Reference Putnam2000), who uses the DDB Needham Life Style Surveys (DDB) to measure trust. DDB asks respondents if they agree with the statement “most people are honest.” The responses are reported on an agree/disagree scale of 1 to 6, where 6 represents the highest level of agreement. Following Nagler (Reference Nagler2011), we construct the trust index by averaging responses in each state for each year using the survey sample weights. In order to investigate the interconnections hypothesized in the discussions earlier, we interact CRI with Trust.

We also include a set of economic and demographic control variables in our estimation. First, we control for the presence of state-level strategic interaction in environmental policy. Fredriksson and Millimet (Reference Fredriksson and Millimet2002) and Konisky (Reference Konisky2007) suggest that states take their neighbors (which may at times be competitors for investment) into account when implementing environmental policies. We include the income-weighted average of neighboring states’ environmental policy stringency (Neighbor Stringency). Second, we control for per capita GDP (GDP). We expect per capita GDP to have a positive effect on Stringency if environmental quality is a normal good (Kahn and Matsusaka, Reference Kahn and Matsusaka1997). Third, we include energy and land prices. Energy Price is the state-level average of industrial sector energy prices that reflects supply and demand conditions in the local market for energy, and Land Price is the state-level average of agricultural land prices per acre (Fredriksson et al., Reference Fredriksson, List and Millimet2004). The price variables reflect interest group and voter pressures on the stringency of environmental regulations. The variable % Legal Services is the share of legal services in GDP in a state, and helps account for differences in enforcement of environmental regulations across states. It reflects the resources allocated to monitoring and enforcing regulation, or to protecting firms from enforcement (see, e.g., Fredriksson et al., Reference Fredriksson and Svensson2003; Gray and Shimshack, Reference Gray and Shimshack2011). Finally, Education reflects the level of environmental awareness and hence the demand for stricter environmental policies. Education is measured by the percentage of individuals with a college degree or above.

We estimate the relationship between environmental policy, corruption, and trust using an Arellano–Bover/Blundell–Bond type system GMM estimator. The results, which are presented in Table 6.1 and Figure 6.1, suggest that the effect of an increase in the level of corruption on environmental policy is conditional on a state’s level of trust. In states with low levels of trust, corruption weakens environmental policy. However, as the level of trust increases, the effect of corruption declines. Eventually, at high levels of trust, corruption has no effect (or even a positive effect) on environmental policies because the industry and environmental groups have more equal strength and influence.

Figure 6.1 Marginal effects of CRI on Stringency (conditional on Trust)

Our results are both statistically and economically significant. A one standard deviation increase in corruption in Mississippi, a low trust state, decreased environmental stringency by approximately 0.2 standard deviations in the late 1980s and the early 1990s. On the other hand, in a high trust state such as Vermont, the standardized effect of corruption was not statistically significantly different from zero within the observed values of Trust. In Delaware, another high-trust state, the effect was positive.

As mentioned earlier, our measure of environmental stringency is constructed based on self-reported abatement costs. Hence, misreporting is a concern. As a robustness test, we also estimate a parsimonious model using per capita carbon emissions as the dependent variable. The data come from the Carbon Dioxide Information Analysis Center (CDIAC).Footnote ² The results of the Arellano–Bover/Blundell–Bond system GMM estimation are presented in Table 6.2. The results are consistent with our earlier results. The estimated coefficients of CRI and the interaction term are significant at least at the 5 percent level and have the expected signs. Corruption has a positive effect on aggregated emission levels, but the effect declines as the level of trust rises. Figure 6.2 shows the marginal effect of CRI on emissions, conditional on the level of Trust. For low levels of trust, the marginal effect of corruption is clearly positive – that is, higher levels of corruption, greater emissions. However, as Trust rises, the marginal effect declines and eventually becomes negative.

Figure 6.2 Marginal effects of CRI on Emissions (conditional on Trust)

This analysis dovetails with discussions in Chapter 7 of this book, such as the analysis of compliance with COVID social distancing rules to be presented in Chapter 7. Environmental policy is a useful area to study interactions among corruption, trust, and public policy because the states, as civil societies in their own right, have considerable flexibility in making and implementing policy, and because corruption, trust, and the range and relative strength of industrial and environmental interest groups can vary considerably from one state to the next. Given that range of state-level influences, it is not surprising that environmental trends and effects are often observed only with a considerable time lag, facilitating corrupt influences that themselves are usually kept secret. Our findings may also have policy implications regarding anti-corruption reforms aimed at strengthening environmental and other policies, endeavors that will inevitably require resources and time. If greater trust does mitigate the effects of corruption, additional reform efforts should be allocated to states with low levels of trust, and environmental advocates in those states (like their counterparts in others) should be as concerned about deepening social capital and trust as they are about alleviating specific environmental problems.

6.4 Conclusion

The connections among corruption, trust, and the economics and politics of making and implementing environmental policies reinforce important findings in Chapters 3–5 of this book regarding the deep roots and pervasive consequences of corruption. Corruption does indeed seem to weaken environmental safeguards, particularly where trust is weak, and does so in ways that are also apparent when we look in more detail at specific states. Furthermore, the strength of that finding varies depending upon levels of trust in a state – a finding that should not be surprising when we think about the ways environmental issues can pit private against public interests and can raise compelling questions as to whether one’s neighbors and competitors will follow any rules that are made and abide by any restrictions on the use of money to influence policy decisions. The similarities between the findings in this chapter that (of necessity) refer specifically to realities of some years ago and our findings regarding compliance with COVID-19 rules and restrictions (see Chapter 7 of this book) suggest that the apparent behaviors and attitudes in question are neither new nor transitory. Instead, they are likely deeply rooted within American and state politics.

One important implication of those findings, one to which we will return in Chapters 8 and 9, is that any conception of American corruption that is confined to specific acts of official misconduct or venality, or to private interests that pay overt bribes, is seriously incomplete. The same is true of any program for reform limited to enacting new anti-corruption laws. What is emerging from our chapters is a political system that seems increasingly unable to engage the trust and active support of citizens and economic interest groups, and an economy in which citizens – for good reason, in most cases – lack a sense of a common stake or destiny. As even a brief look at recent headlines will suggest, it is a system increasingly unable to foster trust in officials, institutions, and policies, and whose processes and effectiveness suffer from a lack of trust among citizens themselves. Important as environmental issues are in themselves, they also reflect disquieting trends and truths regarding the ability of a democratic republic to govern itself in ways that are both effective and widely accepted as fair.

Looked at that way, America and its states face a challenge not only of regulating political and administrative processes, and relationships between wealth and power (see, for a pessimistic account, Hacker and Pierson, Reference Hacker and Pierson2020), but also of restoring – or creating anew – politics at the state and national level that deserves, and can engage, social trust in its processes and outcomes. As difficult as controlling corruption itself has always been, rebuilding trust is equally challenging. As we shall see in Chapter 9, addressing that challenge will mean understanding, and making intelligent changes in, several aspects of our political processes. It will also require us to understand the outlooks of a citizenry among whom trust has become seriously depleted. Failing those tests will mean not only continued corruption but also that our responses to serious state and national challenges will be seriously ineffective. For evidence on that point, we turn to the effects of corruption on public health provision, and on our responses to the ravages of COVID-19 in Chapter 7.