We analyze the determinants of environmental policy when two firms engage in two types of lobbying against a restriction on allowed pollution: General lobbying increases the total amount of allowed pollution, which is beneficial for both firms. Private lobbying increases the individual pollution standard of the lobbying firm, but has a negative or zero effect on the allowed emissions of the competitor. We determine the lobbying equilibrium and discuss the resulting emission level. In many cases, a higher effectiveness of private lobbying is detrimental for firms and beneficial for environmental quality, as it induces firms to turn towards excessive amounts of relatively unproductive private lobbying.
Environmental Regulation Pollution Standards Interest Groups Lobbying Policy Making