Environmental projects in the presence of corruption

Abstract

This paper establishes that in the presence of corruption, the implementation of technologically advanced environmental policies may result in lower environmental quality. In corrupt countries, politicians may allocate a large fraction of public funds to environmental projects with the intention of increasing their ability to extract rents, rather than improving environmental quality. This has both a direct and an indirect negative effect on environmental quality. First, due to extensive rent-seeking, the effectiveness of environmental projects is disproportional to the amount of public funds allocated to them. Second, citizens who observe the poor outcomes of environmental projects are more prone to tax evasion, which results in reduced public funds. A vicious circle of extensive tax evasion and rent-seeking activities thus emerges, which has a detrimental effect on environmental quality. Anecdotal evidence from a number of corrupt countries shows little or no improvement in environmental quality, despite the implementation of technologically advanced environmental projects.

Corruption, Hidden Economy and Environmental Pollution: A Spatial Econometric Analysis Based on China’s Provincial Panel Data

“…They measured environmental quality with the Environmental Performance Index and found that lower corruption will weaken the positive relationship between economic growth and environmental performance. Lapatinas et al [13] found that in the presence of corruption, the implementation of technologically advanced environmental policies may result in lower environmental quality. With a partial least square regression model and panel data of BRICS economies from 1996 to 2015, Wang et al [14] analyzed the moderating role of corruption in the relationship between growth and CO 2 emissions, and found lower corruption reduces CO 2 emissions.…”

Economic Complexity and Environmental Performance: Evidence from a World Sample

“…See also[82] who explore additional channels through which corruption may impact environmental quality in a theoretical model. See also the discussion in[92].…”

Where is the gray side of green growth? Theoretical insights, policy directions, and evidence from a multidimensional approach

“…Besides, from a psychological aspect, it can be inferred that communities with approval of individual corruption activities tend to ignore the overall impact of environmental pollution and societal benefits of green growth. Additionally, environmental policies may fail in corrupt countries where policy instruments are used to support rent-seeking activities instead of protecting the environment (Lapatinas et al 2019). Corruption can attract rent-seeking multinationals from countries where corruption is strictly controlled.…”

“…On the other hand, the success of environmental policies is somehow affected by prevailing public sector corruption which may obstruct both the setting of new environmental standards and the implementation of existing programs (Zhang et al 2016;Candau and Dienesch 2017). Even though the pollution havencorruption paradises nexus has attracted the interest of researchers (Welsch 2004;Pellegrini and Gerlagh 2006;Candau and Dienesch 2017;Danish and Wang 2019;Lapatinas et al 2019), the current literature has paid a little attention to the indirect impacts of corruption which may intervene in the relationship between environmental policies and decarbonization performance of countries.…”