Unilateral Actions the Case of International Environmental Problems

a more satisfactory explanation for how “setting a good example” could be ac-
complished, why costs are correlated and how revelation of costs in one country
changes incentives in other countries.

The alternative way of modelling the spillover effect on the level of environ-
mental regulation in other countries is by taking into consideration the political
process in the countries. An example will be presented below, building on a
simple influential function approach inspired by Becker (1983).¹⁵ We assume
that the decision about the level of environmental regulation in a country is de-
termined by the lobbing activities of two pressure groups: An industrial group
(IG) lobbying for no reductions and an environmental group (EG) lobbying for
high reductions.¹⁶ The more pressure a group exerts, the more it influences the
policy outcome. According to Svendsen (1998), the EG try to maximize their
influence through maximizing membership. Increasing membership increases
payments and, hence, enables these groups to increase their lobbing activities.
One way of increasing membership is to convince potential members of the im-
portance of a strong EG. By pointing to achievements in other countries and
arguing that these results are a consequence of strong EGs the domestic EG has
a strong argument that results in higher pressure on the decision-makers. On the
other hand, an IG uses issues such as losses of international competitiveness
and, consequent increases in unemployment and reductions in export as argu-
ments against environmental regulation. The higher are the reduction costs, and
the more severe the problems related to the IGs, the more weight will the IG’s
arguments receive in the decision.

In order to integrate this public choice model into the signalling model, we must
still require that qi is the outcome of a maximizing process. This requires a re-
interpretation of the cost and benefit functions associated with reducing emis-

15 See also Potters and Sloof (1996) for a survey of this type of model.

16 That lobbyism influences the decisions of policy-makers is well documented. Svendsen (1998)
mentions that all eight existing US permit marked programs have been distorted politically
through lobby activities. Haas, Keohane and Levy (1993) note that if there is one key variable
accounting for policy change, it is the degree of domestic environmentalist pressure in major
industrialized democracies, and not the decision making rules of the relevant institution.

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