Democracy, Political Institutions, and Environmental Policy PG Fredriksson, University of Louisville, Louisville, KY, USA JR Wollscheid, University of Arkansas-Fort Smith, Fort Smith, AR, USA ã 2013 Elsevier Inc. All rights reserved.
Glossary Majoritarian electoral system The electoral candidate receiving the highest vote share represents a district. Measures of democracy Empirical indices which measure the level of democracy across countries. Parliamentary system of government The executive and legislative branches are intertwined. The legislature is accountable to the executive branch. Presidential system of government The executive and legislative functions of government are separate.
Introduction This article surveys the literature on the effects of the level of democracy and forms of political institutions on environmental quality and policy outcomes. The literature that makes comparisons between the environmental outcomes in democracies versus autocracies, and the different levels of political competition within democracies, is discussed. The political institutions surveyed include presidential versus parliamentary governance systems, majoritarian versus proportional electoral rules, closed versus open voting list systems, and different number of veto players. In the last few decades, the literature has started to address these issues, but the results have not fully converged and research is still ongoing. This article is structured as follows. The section ‘Democracy’ discusses the theoretical and empirical literature on democracy and the environment. The section ‘Political Institutions’ discusses political institutions such as governing structure, electoral system, ballot structures, and political competition. The section ‘Conclusion’ provides a brief conclusion.
Democracy Theory Democracy is a multidimensional concept and can be viewed from different perspectives. Researchers in this area generally try to measure the degree of democracy by a country’s level of political rights and civil liberties. The level of political rights is jointly determined by the degree of freedom to run competitively for political office as well as the level of political participation among the voting public. The level of civil liberties encompasses the extent of freedom of expression and beliefs, the right to organize, the rule of law, and the degree of personal autonomy and individual rights. Why would the level of democracy affect the environment? Recall that an extensive literature on the Environmental Kuznets Curve recognizes that an increase in per capita income generally results in improved environmental quality.
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This provides checks and balances, which limit the power of both the chief executive and the legislature. The president and members of the legislature are elected separately by voters. Proportional electoral system Seats in the legislature are allocated to each party according to the proportion of votes obtained. Veto players Major individual or collective actors who have to agree for a policy change to occur (e.g., the president, the House, the Senate).
The improvement occurs in part because of an increased demand for environmental quality as income rises. The degree to which a higher demand for environmental quality feeds into actual environmental policy-making depends on a number of factors, including the level of democracy and existing political institutions. The extent to which citizens are allowed, and are able, to organize collective action certainly impacts environmental policy outcomes. The early theoretical work in this area examined how environmental regulations are formulated to maximize the utility of (i) the median voter (in democratic systems) or (ii) an authoritarian ruler (in nondemocratic systems). In this work, the results are driven by two forces. First, because of the longterm nature of many environmental problems, a short-time horizon of the policy maker implies less-stringent environmental regulations. Assuming that authoritarian rulers tend to have relatively short time horizons, democracies set stricter environmental regulations than nondemocracies. It should be noted, however, that this assumption may be quite strong as empirical and anecdotal evidence suggests that authoritarian regimes may have very long survival periods. Second, an autocratic ruler is likely to appropriate a larger share of the economy’s income for himself. This has an ambiguous effect on the strictness of environmental regulations. On the one hand, a higher fraction of national income going to the autocrat increases his marginal cost of environmental standards because the autocrat now bears a larger share of associated reductions in national income. On the other hand, receiving a larger share of the national income may also lead the autocrat to set stricter environmental standards if environmental quality is a normal good. This would occur to the extent that the autocrat benefits from the provision of environmental quality as a public good. Other theoretical contributions have discussed interaction effects. For example, the literature has found that the effect of income inequality on pollution levels depends on the degree of democracy. Assuming that environmental quality is a normal good and that the productivity of the median citizen is lower than the average citizen’s productivity, the effect of an increase in the median voter’s income is conditional on the level of
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democracy. In a complete democracy, a more equal income distribution is found to improve environmental quality by increasing the median voter’s income. However, in an autocracy where the poor are disenfranchised and only a more privileged group is allowed to vote, higher income equality reduces environmental quality by lowering the income of the median voter. The literature also discusses the case where the relatively wealthy part of the population is able to mitigate the harmful effects of pollution by private mitigation efforts, which reduce the adverse health consequences of pollution. In an autocratic regime controlled by the wealthy elite, the level of environmental regulation is predicted to be essentially nonexistent. In this line of research, the elite is assumed to be able to protect itself from health risks; therefore, it is unwilling to help pay for improved environmental quality for the poor. However, in democratic societies where the poor also have influence, some forms of public environmental policies are predicted to be implemented. Democracies are also more likely to provide information on the health hazards associated with pollution emissions, raising the demand for environmental policies. In sum, most predictions emerging from the theoretical literature point to a positive effect of the level of democracy on environmental quality although in some situations, the effect may be reversed. Part of the literature distinguishes between different aspects of democracy. Fair and free elections determine who sets environmental policy in the most developed democracies. If elections are not competitive, however, some other aspects of democracy, such as the level of political participation, may become relatively less important for environmental quality. Some theoretical work differentiates between various aspects of democracy, particularly the levels of political participation (democratic inclusiveness) and political competition, respectively. When these two democratic forces are relatively strong, both environmental and polluting industry lobby groups are assumed to be less influential in the environmental policy process. Only if the degree of political competition is sufficiently high will incumbent politicians be under pressure to move environmental policies toward their optimal levels. Moreover, with higher democratic inclusiveness, the interests of a greater share of the population are taken into account in the policy-making process. Greater levels of democratic participation and political competition are predicted to yield more stringent environmental policies. Importantly, the impact of democratic participation is predicted to be conditional on the level of political competition, and vice versa. Other authors recognize that the electoral outcomes are determined by a multitude of political choices on a large number of policy issues. Environmental policy may be viewed as a ‘secondary’ policy issue of strong interest to only a subset of voters. This is in contrast to policies such as income taxation, spending, and redistribution instruments that can be characterized as ‘frontline’ policy issues of major concern to most voters. Using a political agency model, the literature has investigated how incumbent politicians may try to win the votes of a small group of single-issue voters by distorting their environmental policy choices away from the politicians’ own preferences and toward these voters. The voters may have strong either pro- or antienvironment preferences. In this model, the
tendency to cater to these groups using the secondary policy is particularly acute when elections are highly competitive and additional votes are especially valuable. In this case, political competition may lead to policy choices distorted away from the politician’s optimal policy because the politician seeks to win the votes of particular groups with intense preferences. When faced with a binding term limit, politicians are assumed to set policy according to their own preferences. This leads to sharp policy shifts when the incumbent can no longer seek reelection because of term limits and is no longer accountable to voters. Additional work on political competition has also been done using a model where bribery takes place at two different levels of government. Bribes may be offered to both the highlevel politicians who decide on the laws and regulations specifying environmental policies (‘grand’ corruption) and to the bureaucrats who manage the implementation of these policies at the local level (‘petty’ corruption). More intense political competition is predicted to yield more stringent environmental policies (higher pollution taxes), lower levels of pollution emissions, and higher fines for cheating on the reported amount of emissions. However, the level of compliance with existing regulations may actually fall with more intense political competition. While higher pollution taxes raise the incentive to underreport emissions, this incentive simultaneously falls with a higher penalty.
Empirical Evidence In empirical work, researchers have used three different measures of democracy. These are (i) the Freedom House index; (ii) the Polity index; and (iii) the Vanhanen index. These indices measure the level of democracy using four criteria: (i) the existence of regular, free, equal, and general elections; (ii) the degree of legislative representation; (iii) the separation of legislative, executive, and judicial powers; and (iv) the existence of civil rights. The three indices are highly correlated. Most empirical studies establish a positive relationship between the level of democracy and the stringency of environmental policies and the level of environmental quality, respectively. However, contrasting findings are also reported in the literature, and thus the empirical effects of democracy are not robust. This article starts with a discussion on the positive effects reported in the literature. In various studies, democratic countries have been found more likely to be associated with lower atmospheric and water emissions such as chlorofluorocarbon, SO2, and CO2 emissions, smoke, heavy particles, total suspended particles, chemical and biological oxygen demand, and fecal concentration in water. More democratic countries are also found to be more prone to protect land from development, to reduce deforestation, to provide public sanitation, and to reduce the lead content in gasoline. Democratic countries are also reported to be more likely to ratify the Montreal Protocol on chlorofluorocarbon emissions, the United Nations Framework Convention on Climate Change (the Rio Convention), the Kyoto Protocol, the Convention on Biological Diversity, and the Convention on International Trade in Endangered Species; and to comply more completely with the reporting requirements of multilateral environmental
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agreements. Thus, the theoretical prediction of a positive effect of democracy receives substantial empirical support. Theoretically predicted interactions also receive empirical backing. The lead content in gasoline is found to be lower in countries with greater levels of political competition, particularly where citizens participate to a greater extent in the democratic process. Moreover, a higher rate of democratic participation reduces the amount of lead in gasoline (i.e., participation raises the stringency of environmental regulations), but only in countries where the level of political competition is sufficiently high. In such countries, the participation rate has meaningful economic, and thus environmental, effects. However, a higher democratic participation rate has no effect on environmental policy in pure dictatorships with an absence of political competition. Additional factors such as income inequality, prevailing age distribution, levels of human capital, and urbanization rates have all been found to affect the net impact of a more democratic regime. However, the results reported in the literature have not converged on this point. For example, the marginal effect of democratization on environmental quality has been found to rise with per capita income. At very low levels of income, many democratic institutions do not yield improved environmental quality and may worsen the environment. This is possibly because the poor strongly favor faster economic growth over environmental quality. As the income level rises, priorities shift toward improved environmental quality. However, according to some authors, the effect of democracy appears to weaken as income rises. Still others suggest that the level of democracy is more important than the income level for explaining deforestation rates. The ability to organize collective action is clearly important for the ability of citizens to influence policymakers. Greater civic freedom, that is, the freedom of civil society to organize action, has been shown to raise the level of compliance with international environmental agreements. Moreover, for a number of pollution types, increases in civil and political freedoms significantly improve environmental quality. For other pollution variables, however, these freedoms appear to have no effect. As discussed earlier, the results reported in the empirical literature are not unambiguous. Higher levels of democracy have, in some studies, been found to increase deforestation rates, CO2 emissions, and water-related soil erosion. Higher levels of democracy are also reported to have no significant effect on pollution measures such as dissolved oxygen, biological oxygen demand, chemical oxygen demand, and nitrates. Some evidence suggests that the level of corruption may be a more dominant determinant than democracy (the two variables are likely to be interrelated), and it is therefore important to take both into account in empirical work. Political rights and civil liberties have been found to have diverging effects on deforestation rates across continents. While deforestation rates declined in Latin America and Africa in the years 1972–91 as a result of improvements in these dimensions of democracy, deforestation actually increased in Asia. However, these findings may be confounded by reforestation programs in countries such as Bhutan and China, where the level of democracy is low. Why is the empirical evidence on the role of democracy occasionally ambiguous? First, as discussed, it should be recognized that the theoretical work in this area does not yield
unambiguous predictions. Moreover, in empirical analysis, it may be important to take lags into account as changes in democracy and environmental policies are unlikely to occur simultaneously. Furthermore, it has been argued that for the ratification of international agreements, external factors such as memberships in international organizations, trade intensity, and the number of other countries that have already ratified may be more important determinants than the domestic level of democracy. Some evidence suggests that an inverted U-shaped relationship exists between democracy and deforestation. Moreover, countries in democratic transition (young or weak democracies) may have the highest rate of deforestation. Finally, political institutions and electoral rules have been shown to affect environmental policy outcomes, and thus the particular institutional framework appears to play a role, at least in countries with some minimum level of democracy. This topic is discussed further in the next section. The empirical literature studying the effect of political competition on environmental policy has taken advantage of the institution of binding term limits for US governors. This institution is in effect in the majority of US states. The empirical findings suggest that when the degree of political competition is weak, the governor has a lower incentive to manipulate environmental policies while competing for reelection. In this case, as the governor gains lame-duck status, she exhibits a smaller policy change than the change displayed by governors exposed to strong political competition. Additional evidence suggests that when the level of political competition is very intense and electoral vote margins slim, governors from different political parties move toward the policy center as long as they are eligible for reelection. However, when facing binding term limits, governors set environmental policies that diverge sharply from the policies set while they were competing for reelection.
Political Institutions Theory Political institutions can be viewed as setting the rules of the game, which influences the incentives of all actors including policymakers, voters, and lobby groups, and thus help determine policy outcomes. The literature has compared the effects of environmental policies on various political and electoral institutions and ballot structures. Examples include comparisons of parliamentary systems versus presidential–congressional systems, majoritarian versus proportional systems, and closed versus open party lists. In a parliamentary system of government, the ministers of the executive branch are accountable to the legislature, such that the executive and legislative branches are intertwined. To stay in power, the legislative majority must keep a potentially unstable coalition together in parliament. Parliamentary systems have a lower degree of separation of powers and a higher level of legislative cohesion than presidential–congressional systems. Thus, in parliamentary regimes, there is a relatively low tendency to create opposing interests and incentives among legislators. The rules governing legislative no-confidence votes in parliamentary systems and the procedures to be followed after the dissolution of government are crucial factors
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influencing the degree of legislative cohesion. The goal of legislative cohesion tends to lead to higher taxes, including higher pollution taxes, more redistribution, and greater rents captured by politicians. Voters in both parliamentary and presidential–congressional regimes have an incentive to limit the tax burden. For voter groups with low environmental concerns, in particular, this includes taxes that address negative pollution externalities, such as the gasoline tax. The separation of powers in presidential–congressional regimes enables voters to more effectively hold politicians accountable, because executive powers are concentrated in a single political office, which voters can more easily discipline. The power to propose a tax, to propose the allocation of the generated tax revenues, and to veto legislation is allocated to politicians in different positions. Thus, conflicts of interest are created. Checks and balances are provided by the separation of powers of the executive and the legislature. This leads to weaker environmental tax policies because large groups of voters prefer low taxes. Under majoritarian (first-past-the-post) electoral rule, the party receiving the greatest number of votes with a district wins each district’s seat; under proportional rule, the seats in the legislature are allocated according to the overall (provincial or national) received share of votes. Thus, in majoritarian systems, political parties may choose to focus on the welfare of only a subset of the population rather than on maximizing aggregate national welfare. Policy-making under a majoritarian system is to a higher degree based on local interests. As a consequence, politicians in majoritarian systems have weaker incentives to enact stringent environmental policies that address national environmental concerns involving cross-district pollution damage. A ‘majority bias’ may emerge at either the national or the state level if the ruling majority party strongly favors its own members’ home districts. For example, the majority party may decide to distort environmental policies by setting weaker policies in majority districts but strict policies in minority districts. This has implications for whether environmental policy should be decentralized to the state or local level and whether federal policies should be uniform across all states or be allowed to vary between locations. In particular, restricting federal legislation to be uniform across all districts would avoid suboptimal policies distorted by ‘majority bias’. Alternatively, if political parties consider environmental hazards faced mainly by the population in pivotal districts, industry lobby groups may be relatively more influential under a majoritarian system, and thus, able to obtain less stringent environmental policies than under a proportional system. In a proportional system, on the other hand, political parties may be expected to consider the welfare of the entire electorate to a greater degree. More voters translate more directly into greater representation in the legislature. This induces political parties to pay greater attention to issues that are regional or national in scope, such as transboundary pollution. Moreover, proportional electoral systems generate more political parties in the legislature. This may open the door to green parties with a strong environmental focus to enter the legislature. This entry affects environmental policy outcomes in important ways, particularly if the green party gains a pivotal role. Political institutions that affect the degree of party discipline also have the power to influence environmental policies.
The level of party discipline may be defined as the degree to which elected legislators vote according to the party’s campaign platform. For example, in a closed-list system, party leaders have the right to determine the position on the ballot of the party’s electoral candidates. This is in contrast to systems in which citizens choose among different individual candidates who may freely enter the race. Closed-list systems give party leaders an important tool to punish legislators’ deviations from the party line and reward party loyalty. In such a system, party leaders are in a good position to determine legislators’ reelection probabilities with their choice of positions on the party’s candidate list. Thus, the party leaders’ influence increases and the degree of party discipline rises under a closed-list party list. Party discipline shifts policy decisions to the national level, away from the local constituency’s more narrow interests. If national party leaders have the party’s overall electoral future in mind, they are more likely to promote environmental policies that address pollution spillovers across political districts. The literature also analyzes the role of the organization of legislatures for environmental policy outcomes, in particular, bi- versus unicameralism. Bicameralism yields a greater number of veto players, where a veto player is defined as an independent institution with veto power over policy, such as an independent legislative chamber. Such a veto player may be assumed to require some form of compensation for moving policy away from the welfare maximizing level. A greater number of veto players raises industry and environmental lobby groups’ cost of influencing environmental policy because a greater amount of campaign contributions or bribes must be paid. This induces the lobby groups to scale back on such gifts. A higher number of veto players will thus be associated with policies that are closer to the optimal levels. Moreover, the dispersion of policies should be lower in bicameral than unicameral systems.
Empirical Evidence The literature reports evidence that parliamentary systems set higher gasoline taxes than do presidential–congressional systems, and that democracies with proportional electoral rules tend to set stricter environmental policies than do majoritarian systems. This line of research also indicates that the positive effect of democracy on environmental policy, as reported in the most of the literature, is primarily driven by the parliamentary democracies. In fact, some evidence suggests that presidential–congressional systems frequently set environmental policies that are not significantly different from those set by autocracies, everything else being equal. Moreover, both proportional and majoritarian electoral rules systems set stricter policies than do dictatorships. Legislative cohesion in parliamentary systems is affected by the presence of the vote of investiture. The investiture vote implies that a vote of confidence has to be passed for the government to legally assume office, rather than the government simply being appointed by the head of state. The survival of coalition governments in parliamentary systems is the result of complex bargaining processes among parties in parliament. The literature reports evidence that environmental policies are more stringent in parliamentary systems where the investiture
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vote is used. Thus, legislative cohesion may be an underlying driving force behind why parliamentary systems set stricter environmental policies. The empirical literature also suggests that an interaction effect exists between closed-list voting systems (which yields high party discipline) and the level of corruption. Higher party discipline tends to raise environmental policy stringency when the level of corruption is low but to reduce stringency when the degree of corruption is high. The latter effect occurs because corrupt national party leaders will enforce votes for weaker environmental policies among legislators. The literature utilizing cross-country data also reports that in democracies, the dispersion in gasoline taxes and other environmental policies is lower in bicameral than unicameral systems, consistent with theory. In addition, bicameralism tends to have a positive effect on policy stringency in countries with relatively low levels of corruption.
Conclusion This article has reviewed the theoretical and empirical literatures on democracy, political institutions, and the environment. While a majority of the literature suggests that an increased level of democracy is associated with higher environmental policy stringency and improved environmental quality, there is some indication that the relationship may sometimes be the reverse. Research on the effects of political institutions on environmental policies has focused on comparing different governance systems, electoral regimes, and ballot structures across countries. This is an expanding field where much remains to be done. Insights from this literature may prove useful also for other research questions where the endogenous determination of environmental policy is of importance, such as studies of the pollution-haven hypothesis.
See also: Political Economy: Empirical Methods for Political Economy Analyses of Environmental Policy; Environmental Federalism: Empirics; Environmental Justice: The Experience of the United States; Lobbying, Voting, and Environmental Policy: Theory; Political Economy of Instrument Choice; Political Economy of International Environmental Agreements; Public Acceptability of Incentive-Based Mechanisms; Strategic Environmental Policy.
Further Reading Buitzenzorgy M and Mol AP (2011) Does democracy lead to a better environment? Deforestation and the democratic transition peak. Environmental and Resource Economics 48: 59–70. Congleton RD (1992) Political institutions and pollution control. The Review of Economics and Statistics 74: 412–421. Deacon RT (2009) Public good provision under dictatorship and democracy. Public Choice 139: 241–262. Eriksson C and Persson J (2003) Economic growth, democratization, and the environment. Environmental and Resource Economics 25: 1–16. Farzin HY and Bond CA (2006) Democracy and environmental quality. Journal of Development Economics 81: 213–235. Fredriksson PG and Millimet DL (2004) Comparative politics and environmental taxation. Journal of Environmental Economics and Management 48: 705–722. Fredriksson PG, Neumayer E, Damania R, and Gates S (2005) Environmentalism, democracy, and pollution control. Journal of Environmental Economics and Management 49: 343–365. Fredriksson PG and Wollscheid JR (2010) Party discipline and environmental policy: The role of ‘smoke-filled back rooms’. The Scandinavian Journal of Economics 112: 489–513. Hotte L and Winer SL (2012) Environmental regulation and trade openness in the presence of private mitigation. Journal of Development Economics 97: 46–57. List JA and Sturm DM (2006) How elections matter: Theory and evidence from environmental policy. Quarterly Journal of Economics 121: 1249–1281. Persson T and Tabellini G (2000) The Economic Effects of Constitutions. Cambridge, MA: MIT Press.