Greening in Groups: Firm Cooperation and Support for Green Industrial Policy

• In Event: Political Economy of Firms

Abstract

When do firms support and lobby for green industrial policy? Existing accounts on firm climate preferences largely focus on regulation, yet green industrial aid has become an increasingly common policy intervention in recent years. In contrast to arguments focusing on collective action problems influencing the decision to abate emissions, I argue that geographic proximity to other firms, by reducing the costs of investment and enabling firms to build relationships, increases the likelihood that firms cooperate on decarbonization innovation and lobby for green aid. Using French lobbying data, I assess influence patterns among EU-ETS regulated and lobbying firms. To strengthen causal identification, I leverage a shock to the potential green state aid budget: France Relance, an economy wide policy in response to the COVID-19 pandemic that quintupled the size of green state aid budget. Additionally, I leverage distance to mid-20th century industrial zones as an instrument for geographic proximity to address omitted variable bias. I find more proximate firms are more likely to lobby for green industrial policy, in general and in particular following the budget shock. The results highlight that the distribution of emissions within the firm and of plants across the economy have implications for industrial decarbonization, a growing challenge for (post)-industrial economies. I complement the quantitative results on lobbying with interview data and secondary source measures of cooperation to assess mechanisms and efforts of decarbonization in the presence and absence of government support. Complementing recent work leveraging economic geography arguments in comparative political economy which stress the importance of employment patterns for individual political behavior, the present research suggests patterns of production are likewise influential for firm lobbying, innovation, and environmental outcomes. Furthermore, the present analysis leverages novel lobbying data as well as collects original geographic data on the distribution of industrial firms in France to study climate politics and lobbying outside of the United States, a context which has dominated quantitative analyses to date in both literatures.

Author

• Ryan Pike, Yale University