Lobbying against environmental regulation vs lobbying for loopholes

Abstract: 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 competi-tor. We determine the lobbying equilibrium and discuss the resulting emission level. In many cases, a higher effectiveness of private lobby-ing is detrimental for firms and beneficial for environmental quality, as it induces firms to turn towards excessive amounts of relatively unproductive private lobbying