Brokering interests: The use of market based policies by interest groups

Objective. This article begins the process of broadly evaluating the role of nongovernmental actors in regulatory markets by specifically examining environmental groups' use of the sulfur dioxide (SO2) market established by Title IV of the Clean Air Act Amendments of 1990. This research posits that the use of nonexclusionary markets in environmental quality regulation allows interest groups a nonpareil opportunity to seek to directly affect policy outcomes. Methods. This article uses two forms of analysis. The first part of the article provides a qualitative analysis of the motives of interest groups that use incentive-based policies in an attempt to achieve their desired policy outcomes. The last section of the article uses empirical data from the Environmental Protection Agency's Allowance Tracking System to evaluate interest groups' use of market-based policies. Results. The use of market-based mechanisms in public policies offers interest groups a new form of participation in the policy process, yet it seems that only 'new' groups are willing to enter the market. Further, I find that though the participating groups may not be able to affect the relative price of allowances (as they claim they will), they nonetheless are able to reduce the absolute number of allowances available. Finally, using market-based policies to achieve their preferred outcomes may be a 'rational' decision for groups in that the 'return' on their investment may indeed be quite high. Conclusions. One aspect of pollution markets is clear - they do create an interesting new mechanism of public activism for groups that wish to protect the environment but do not want to 'lobby or litigate.' By purchasing pollution allowances groups attempt to directly affect environmental policy outputs without entering the policy cycle as it has been previously understood. As market-based policies are employed more broadly, opportunities accorded to environmental groups for active involvement in seeking to limit ambient pollutants, as well as the groups' potential impact, may only expand