Dear RegBlog: Special Interests Can Capture Agencies, Too
Regulatory capture occurs when special interests co-opt the power of the government in order to advance their own interests at the expense of the public as a whole. Over at RegBlog, there is a 16 part series on regulatory capture, but almost all the contributors make the same mistake of assuming that industry is the only threat. In fact, ideological special interests also capture agencies and, in this manner, push for inefficient or even nonsensical regulations to the detriment of the public good.
In a 2013 law review, I argue that environmental special interests have captured environmental policymaking during the Obama administration. Consider the Natural Resources Defense Council and the EPA. Green groups often are thought to be the David against industry’s Goliath, but that’s not true anymore. Far from being the ‘little guy,’ NRDC has annual revenues of $130 million and assets greater than $300 million, according to its most recent tax filings.
NRDC wields political clout in proportion to its tremendous resources. In 2003, NRDC started a 501c(4) lobbying group, NRDC Action Fund, to “work to educate and mobilize voters.” During the last election cycle, “NRDC Action Fund primarily operated by encouraging its donors to donate directly to candidates or environmental advocacy groups,” reported The Washington Post. NRDC is also involved in LeadingGreen, a new collaboration of environmental groups that will steer donations to federal candidates and enlist the help of major donors in lobbying elected officials.
By all accounts, NRDC’s political contributions have paid off in the form of access at the highest levels of executive environmental policymaking. Many NRDC officials were tapped by Obama to serve as political appointees at the EPA. At the Department of Energy, NRDC helps craft efficiency standards through direct “negotiated rulemakings” with the government. Most strikingly, the New York Times reported that three NRDC lobbyists wrote the “blueprint” for President Obama’s marquee climate policy, the Clean Power Plan.
So we have an entity that checks off all the boxes for regulatory capture. It’s got lots of money. It influences politics. And then it’s granted access to literally write policy. Of course, some commentators will claim: “But NRDC is selflessly lobbying to achieve environmental protection, which is always a great thing, right?” Wrong.
For starters, it’s naïve to think that NRDC is immune from pecuniary self-interest. As I noted above, NRDC has annual revenues of $130 million and growing. Obviously, NRDC can and does sell its evident influence to donors. After all, what is a better fundraising pitch than being credited by the New York Times with writing the EPA’s most important rule?
More broadly, NRDC’s priorities do not align with those of the public. Remember, all policymaking is a balancing of interests. For environmental policymaking, the balance is often struck between economic progress and environmental protection. But NRDC’s input is decidedly unbalanced. As with modern environmentalism as a whole, the NRDC demonizes industry in general, and fossil fuels in particular. They’ve personified coal as “evil” and they believe that global warming should be the world’s number one priority. However, these positions are not shared by the vast majority of the Americans, who worry about their material wellbeing in addition to environmental protection.
Consider, for example, the Mercury and Air Toxics Standards, which were a top priority for NRDC during President Obama’s first term. The rule costs $10 billion annually and threatens to shutter 17% of the nation’s fleet of coal-fired power plants (just as NRDC and EPA intended). Given these costs, you’d expect that the rule would lead to big public health gains, but you’d be wrong. The ridiculous justification for the rule is to protect a putative population of pregnant, subsistence fisherwomen who consume more than 200 pounds of self-caught fish, from exclusively the most polluted bodies of fresh inland water. The average American no doubt would consider this rule to be a waste; to NRDC, it was a policy success.
The MATS rule is not the only regulatory inefficiency engendered by regulatory capture at the EPA. Consider as well the climate rule that was written by NRDC lobbyists. In addition to threatening the provision of affordable and reliable electricity, the NRDC/EPA climate rule would lead to an unprecedented shift in authority between the EPA and states. Yet it would not in any way impact the global climate. To the average American, this is an awful deal.
There are other deleterious manifestations of NRDC’s capture of EPA, such as the phenomenon known as “sue and settle,” which I explain in more detail in the aforementioned paper.
In sum, most of the contributors to the RegBlog series on regulatory capture overlooked the fact that ideological special interests, no less than industry, are capable of unduly influencing administrative agencies. Though there’s no empirical data, I’d bet that policy groups now are more likely to capture agencies than industry. Regarding this intuition, it is perhaps telling that I couldn’t find one example of regulatory capture by industry in any of the posts of the series.