The European Union’s Emission Trading Scheme: Political Economy and Bureaucratic Rent-Seeking

A political economy model is presented that proposes an effective explanation as to why national allocation plans in the emissions trading scheme of the European Union have taken the form they have. The influence of the national bureaucracy, which is omitted in the majority of the related political economy literature, is shown to be potentially significant and costly – particularly through its interaction with the influence of the affected industrialists. The analysis suggests that the role of the national bureaucracy in the design of environmental policy should be carefully considered and structured, and suggests an avenue of potentially important and fruitful future research.