Offshore Outlaws: Brexit and Oil Spills in the North Sea

Globalization has led to various forms of international integration whose effect on environmental behavior has been a long-standing source of debate. Yet, in recent years, there has been a growing backlash against international institutions, in part motivated by the will of taking back control of national borders. Focusing on the United Kingdom's withdrawal from the European Union, this paper explores the effects of this type of backlash on firms' environmental standards. Despite being defined as a sovereignist project to enhance state power and national regulatory oversight, we argue that Brexit caused immediate suboptimal environmental outcomes. Specifically, Brexit created policy misalignment, pushing the UK regulators into a capacity vacuum. This led to a transition period of impunity for polluting firms, further catalyzed by accelerating market changes, which led firms with lower environmental compliance to sort into the market. We test our theory with evidence from the oil sector's offshore rigs in the North Sea between 2015 and 2023. A grid-cell analysis of satellite-detected oil spills compares firm behavior in the United Kingdom, European Union, and Norwegian jurisdictions. We first find that, after Brexit, UK waters experienced significantly less environmental protection compared to the EU and Norway. Additionally, we show that the environmental damages following Brexit are not associated to a decrease of UK public salience for environmental protection, but by a new ecosystem of firms that were allowed to reap short-term profits from Brexit.