Environmental regulation informed by biased experts

Abstract

Public consultations are widely used in regulatory processes. They are intended to allow stakeholders (firms, NGOs, the civil society) to present their viewpoints and to provide information useful for the decision, even though their own interests are biased. We develop a framework to analyze decision-making informed by biased stakeholders. Some of them are known to be pro-business (firms) or pro-environment (NGOs, environmental agencies), while other have small but unknown bias (national authorities). If a stakeholder's advice runs against its bias, or if stakeholders with opposite bias agree on a decision, the regulator should follow it. Otherwise, the regulator should follow the advice of stakeholders with small and unknown bias. We then investigate to what extend our analysis is consistent with the regulation of chemicals in the European Union. We do find evidence that the regulatory outcome is strongly influenced by the opinion of stakeholders with opposite interests, but only for firms not for NGOs and environmental agencies. We also document a higher impact of national authorities compared to other stakeholders. (With Jessica Coria)