The business perspective on climate change: Firms, special interest groups, and their influence on climate policy design

The influence of firms on the elaboration of climate policy in a democratic system is quite controversial. Firms do not form a solid bloc of opponents to environmental regulation. Some firms even expect to gain from such regulation, either because they offer goods and services that will allow other firms to comply with the regulation or because they are in a better position to comply than their competitors. Some forms of environmental regulation protect incumbents against new entrants (Brau and Carraro, 2004). As a result, the detailed features of climate policy (e.g. exemptions, technological assistance, targeted subsidies) are more important than the general thrust. Firms and industry sectors could try to influence those features rather than oppose the policy upfront. That makes it much more difficult to detect their influence. In addition, some of the detail modifications obtained by firms need not be a loss for climate policy. This paper is about assessing the influence of firms on climate policy. Our key research questions are: 1. Why should firms influence climate policy making? 2. Who has an incentive to influence climate policy? 3. How do firms influence the political decision-making process in climate policy? This task requires examining the complex role of firms in drafting climate policy. When considering the chain of activities from the perception of an environmental problem to the implementation of a solution addressing that problem, there are many stages at which firms can influence policy making: they can challenge the perception and assessment of the environmental problem (they frequently hire the best specialists); they participate in the debate on measures needed to address the problem; they can influence the drafting of the policy and the agenda, directly or through organizations and parties; they may exert pressure on wording the detailed features of the regulation; they can influence opinion making all along the democratic process; and they can influence implementation and its oversight. We find that firms participate in the slow but gradual shifting of conflict lines around environmental policy, away from the classical boundaries of the bipolar 'pro-growth' vs. 'pro-ecology' coalitional conflict. A certain number of factors point to the possibility of cross-cutting coalitions in the domain of environmental policy: the environment is a classic 'new politics' issue that cuts across the traditional left-right partisan alignment (Kitschelt, 1989), programmatic partisan differences in environmental policy should fade in the light of new global environmental challenges (Carter, 2006). Countries address the global environmental challenges through international negotiation and exchange, leading sometimes to international environmental agreements. National firms and their lobby groups might influence the international bargaining position of their authorities (Altamirano, 2007). Multinational firms and their organizations directly participate in the negotiations. This leads us to compare three different scientific approaches to climate policy: the neo-pluralist perspective in political sciences (Falkner, 2008), non-market strategies in business studies (e.g. Baron, 2006), and the economists’ classic public choice approach (Olson, 1968). Accordingly, we consider the ‘Political economy of climate policy’ as it is widely discussed for international trade policy (e.g. Baldwin, 1989; Cadot, 2004). Our research focus is on national climate policy making, but it will consider the links to international negotiations.