When the Weak Win: The Role of Investment in Environmental Lobbying

Old and environmentally damaging industries often lobby effectively for less stringent regulations and are slow to adopt new and cleaner technologies. This paper explains the lobbying success of these industries in terms of the strategic role of investment as a credible commitment device. It is demonstrated that if governments are predisposed to special interest groups, underinvestment in new technology enables firms to lobby more effectively. Such industries are shown to be better placed to extract policy concessions, despite contributing less to the government in political donations. The analysis therefore suggests that political considerations may provide a significant incentive for firms to reject environmentally beneficial investments, even when these lower production costs.