Greening in Groups: Firm Concentration and Lobbying on Green Industrial Policy

Abstract: Green industrial policy is an increasingly common tool for states seeking to reach mid-century decarbonization targets. Whereas existing explanations of firm climate preferences largely focus on regulation, explanations for assistance lie at the sector level. I argue that a firm’s geographic concentration, by increasing the potential proximate benefits that a firm can accrue following expansions to the green assistance budget, increases the likelihood a firm directly lobbies on green industrial policy. Assistance budget expansions make feasible transformational decarbonization projects, large enough to spillover to multiple firms in a given area, hence those firms that are most concentrated to other firms stand to gain the most. Using French lobbying data, I assess how manufacturing firms responded to the expansion of green assistance as a part of the COVID-19 stimulus policy: France Relance. Using this exogenous funding shock in a difference-in-differences design, I find that more concentrated firms increasingly lobby on green industrial policy. This finding holds when I consider intra-industry heterogeneity in concentration with more concentrated firms increasingly lobbying alone. These results suggest that firm behavior towards green assistance is structured by a geographic rather than based on sector- or emissions intensity-based cleavage.

Recommended citation: Pike, Ryan. (2024). Greening in Groups: Firm Concentration and Lobbying on Green Industrial Policy. Working Paper.