Chapter 6 questioned how countervailing lobbying and the potential waste of resources could be applied to the case of brown and green power plants. Sometimes interest groups may fight each other, competing for economic rents. Such competition, however, may lead to socially wasteful outcomes. So how can countervailing lobbying and the potential waste of resources be applied? We argued that two countervailing lobbying groups, such as those of green and brown power plants within the European Union Emissions Trading System (EU ETS), will bid against each other in their quest for special political favours. Countervailing lobbying was dealt with in a non-cooperative game setting with a Prisoner’s Dilemma. Both symmetric and non-symmetric cases were analysed, and lobbying effort was assessed with respect to its distortive effect, its waste of resources and the ‘slack’ generated in policy changes. The model suggests that lobbying costs should be raised in order to reduce lobbying effort and thereby minimize the waste of resources. Making lobbying more costly is the most effective way to reduce the influence of lobbying incentives on policy, thus reducing the welfare loss associated with lobbying.
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