Greasing the Wheels: the Politics of Environmental Clearances in India

Abstract

Does political alignment at different levels of government influence centralized bureaucratic processes? Environmental clearances are important regulatory tools that allow governments to target the distribution of public goods/bads by both controlling negative externalities and allocating rents from project developers. While commentators advocate for central authorities to control environmental licensing of major projects, in emerging markets with weak formal institutions, it is still possible for local politicians to influence this process. We use data on environmental clearances in India for thermal (primarily coal-fired) power plants between the years 2004 and 2014 to test whether local legislators influence an otherwise bureaucratic process in which they play no formal role. Using a regression discontinuity design, we find that partisan alignment with the state chief minister results in a sharp increase in local clearance applications. This is consistent with the hypothesis that this type of political influence “greases the wheels” of bureaucracy by facilitating more environmental approvals, rather than creating regulatory bottlenecks. Our results contribute to a growing literature that suggests that lower-level politicians can still exert influence on the policy process despite having few institutionalized powers.