The Home State Effect: How Subnational Governments Shape Climate Coalitions

Organized business interests often seek to block public interest regulations. But whether firms oppose regulation depends on institutional context. We argue that, in federal systems, sub-national policies and politics can have a home state effect on firms' national policy preferences and the lobbying coalitions they join. State policies that force firms to absorb regulatory cost can reduce the marginal cost of national policies, leading to preference shifts. In addition, firms regulated at the state level have incentives to strategically align with their state governments to avoid future regulatory cost. We test our argument in the context of U.S. climate politics, matching original data on the positions of electric utilities toward the Clean Power Plan and data on ad hoc coalition membership with data measuring state policy stringency and state government positions. Quantitative evidence is consistent with hypotheses: both state policies and state politics influence utilities' positions on national climate policy. Qualitative evidence from elite interviews helps clarify the roles of different mechanisms. Our findings underscore the importance of sub-national governments in shaping national lobbying coalitions.