John Kiley Econ-328 4-18-2012

Lobbyist's Effects on Environmental Policy

John Kiley 4/18/2012

John Kiley

Econ 328

Washington has long been encumbered by lobbyists and interest groups directing Congress and Washington towards industry's own vested interests. Lobbyists enter the political landscape attempting to "lobby" Congress to pass legislation. Generally speaking the lobbyists are attempting to pass legislation that is particularly advantageous to the organization that they represent in order to gain (or not induce a loss) in some manner or another. Author Heinz Eulau points out that American public policy would be very different if not for lobbyists, for better or worse (Eulau). Lobbyists are effective in their actions, drilling legislation through Washington at a pace that citizens could hardly dream of achieving. Some of the legislation passed is not necessarily the voice of the people as perhaps the Founding Fathers may have imagined, but rather it may be the voice of money and industry creeping its way into Washington. There are a plethora of ethical and efficiency questions that arise from a system that allows interest groups to directly impact the "law of the land". Particularly, lobbyist's effects on environmental regulatory policies that have been purposed in Washington are dangerous to the sustainability of American society. A company may find it cheaper to hire lobbyists groups to interfere with legislation that would lower or maintain the level of environmental pollutants it can produce than to comply with the new standards. A firm's willingness to do this raises an entire array of ethical questions; but ethics aside, to be inefficient in the protection of the environment is detrimental to the sustainability of society. The government can create a more sustainable society by removing the incentive to send interest groups such as lobbyists to Washington, altering policies from command and control to market based environmental policies, and by eliminating lobbyists and their caustic agendas from Washington. A remarkable efficiency that the government was able to produce in spite of lobbyists and interest groups crowding the legislative processes was related to the air pollution in California
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and the Zero Emissions Vehicle mandate. The Zero Emissions Vehicle mandate called for the adoption of hybrid and electric vehicles in California. In "The Allure of Technology: How California and France Promoted Electric and Hybrid Vehicles to Reduce Urban Air Pollution" Calef and Goble describe the astounding successes of the government to reduce the emissions from automobiles in California. The Los Angeles area is renowned for its heavily trafficked roads and, as the case reports; it was only expected to increase into the future. Anticipating this and realizing that there was a serious environmental and health hazard brewing, California passed legislation that called for zero emission vehicles on the road within a decade. Major American auto manufacturers opposed this plan but attempted to meet the standards the legislation imposed. While unable to reach zero emissions by 1998 as the legislation had called for, the automobile industry had made huge leaps and bounds in their technology to reduce emissions (Calef and Goble). The success was remarkable; government set a standard and the automobile industry strove to achieve it. While the automobile industry complied and begrudgingly undertook the challenge, oil companies felt threatened and lobbied against the mandate. The government forcing automobiles to become more fuel efficient and less oil dependent and rely more on electricity was seen as a threat to the major oil companies in the United States. Calef and Goble report that five of the major oil companies donated over 1.1 million dollars to Californian politicians trying to sway their vote against the environmental cleanup effort and they report that Mobil spent 3.5 million dollars advertising against the imposition of the mandate. That is almost five million dollars spent attempting to block a mandate that improves technology, improves society, improves health, and improves the environment. The five million dollars that the industry spent is likely less than the hits that the industry took to profits over the long run which is why there is a marginal benefit if the lobbying

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Econ 328

is successful and the mandate is dropped. Looking at the decision of the companies to behave in such a manner seems like a malicious disregard for societal well being, but as long the government allows the unrelenting pursuit of profits it will be advantageous for those with money to use their power to stay in power. This behavior was part of an effort by the businesses to not reduce profits; now it seems likely that a company would react with even more resistance in the event that the government is correcting an externality and thus imposing a cost on the companies. While the Zero Emissions Vehicle Mandate has been generally successful the

threat of lobbyists remains a severe issue in this particular case. If the oil companies had been successful in swaying public opinion about the Zero Emissions Vehicle mandate would California lead the nation in health quality decreased by air pollutants? If oil companies had been successful in swaying politicians with their generous donations would California become a giant cloud of smog? These are questions that should not have to be asked. Lobbyists are clearly an impediment to progression of society. The government has an obligation to protect its citizens and as time has progressed the government has also trended towards becoming the central planner of the United States economy. The United States has adopted a Keynesian economic model as the government has grown. Deficit spending and public investments being a key indicator of such a role it has begun to adopt (Cmara Neto and Vernengo) . The government has assumed the responsibility of protecting its citizens against monopolistic corporations, unsafe businesses, and outright fraudulent companies. As the government is responsible for both the well being of its citizens and the progression of the United States economy it is important for policy makers to consider the aggregate benefits of policies that are introduced for legislation. Washington officials have a duty to their constituents to produce the most good for society. By involving lobbyists and
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interest groups the goals of the government are undermined by the goals of the individual politician. The politician's judgment may become murky with millions of dollars guiding their "yay or nay" towards what may not be the best decision for society. When dealing with environmental policy the politicians elected to Capitol Hill ought to consider more than just the damage to industry's profits, more than their own personal profits, and more than just the absolute health benefits that their proposals produce. They ought to weigh them against each other by quantifying the marginal benefits and the marginal costs and then accounting for the costs of abatement. In the case of the Zero Emissions Vehicle Mandate, things such as the reduction of cost of health treatments for lung related illnesses, the reduction of the cost of fuel, the cost of enforcement, the cost of abatement, weighed against the costs to the economy and industry. Lobbyists unfairly tip this judgment making tool by adding a weight or incentive towards the interests of the industry. Fortunately for California their government was not easily swayed by the dollars the industry was stuffing in legislator's pockets and the proper decision was made for society. The profits lost by the oil companies, which is by no means a starving industry, have been profits earned by the automobile companies for their ingenious technological advancement. The vice president of sales operations of GM said in April of 2012 that "fuelefficient cars and crossovers have been driving our sales for more than a year" and this is in the midst of a recovering economy (Heath). The Zero Emissions Vehicle Mandate in California created an uproar in industry over the advancement of green technology. No penalties were given to companies and there were no correction of externalities. The reaction of the companies to the advancement of technology creates a strong case that if the government were to command and control the industry to clean up its externalities by stating a rigid standard to be met there would be millions and millions of
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dollars being pumped into the pockets of Washington attempting to impede such action. If the government were to create more defined property laws (without the interests of lobbyists involved) it would allow them to switch from the inefficient methods of command and control and establish a market based approach fluidly. In a market based system the government could set a standard that they would like to meet; such as the Zero Emissions Vehicle Mandate, and give all of the companies permits, or fines, or whatever the incentive to behave in an environmentally friendly manner may be, and allow them to be traded and sold to one another. This would detract and distract the interests of companies from sending lobbyists to Washington as it would be less cost efficient for them to do so and could rather meet the goals of their industry while still bettering society (perhaps unwillingly). An outright ban on lobbyists and interest groups in Washington may produce a great benefit to society (albeit difficult), but removing the incentive to lobby may produce a greater one. Many of the damages done to the environment are the direct result of lax property rights and by switching to a market based approach, better defining property rights, and hammering on the cost of externalities the government will reduce the incentives for future lobbyists in Washington. The government could then proceed to use the penalties imposed onto the market

to correct the damages that are being done to society and fulfill its obligation to its citizens. The market based approach would deter the lobbyist's interests from heckling Capitol Hill. Industry's efforts would be better suited haggling with their peers over emissions permits allowing for a more productive and just government to preside over the nation. The California Case proves that there are interests out there who are more concerned about the bottom line than the environment and sustainability. But the case also provides great hope for beating the powers of lobbyists and special interest groups and that the goals of the government can be reached through
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strong ethical politicians who have the opportunity to remove the incentives for lobbyists and make the United States economy and environment strong and sustainable.

John Kiley

Econ 328

Works Cited
Calef, David and Robert Goble. "The Allure of Technology: How California and France Promoted Electric and Hybrid Vehicles to Reduce Urban Air Pollution." Policy Sciences (2007): 1-34. Cmara Neto, Alcino F. and Matias Vernengo. "Fiscal Policy and the Washington Consensus: A Post Keynesian Perspective." Journal of Post Keynesian Economics (2004): 335. Eulau, Heinz. "Lobbyists: The Wasted Profession." Public Opinion Quarterly (1964): 27-30. Heath, Thomas. Washington Post. 3rd April 2012. 10th April 2012 <http://www.washingtonpost.com/business/economy/auto-industrys-higher-sales-reflect-demand-forsmaller-more-fuel-efficient-cars/2012/04/03/gIQA0I8xtS_story.html>.