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The Triple Inefficiency of Uncoordinated Environmental Policies

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  • Michael Hoel

Abstract

When pollution is transboundary and there is international trade, a domestic inefficiency may arise in addition to the well‐known inefficiencies at the international level. More precisely, there will be a Nash equilibrium in which each country chooses a policy that gives it lower welfare than would otherwise be possible given the emission levels of all countries. However, there will also be a Nash equilibrium in which each country chooses tradable emission quotas as its policy instrument to achieve its desired level of emissions. In this Nash equilibrium, welfare in each country is maximised given the emission levels of all countries.

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  • Michael Hoel, 2005. "The Triple Inefficiency of Uncoordinated Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 157-173, March.
    • Handle: RePEc:bla:scandj:v:107:y:2005:i:1:p:157-173
    DOI: 10.1111/j.1467-9442.2005.00400.x
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    Cited by:

    1. Michel Cavagnac & Isabelle Péchoux, 2010. "Domestic Effects of Environmental Policies with Transboundary Pollution," Recherches économiques de Louvain, De Boeck Université, vol. 76(1), pages 113-134.
    2. Kazuharu Kiyono & Jota Ishikawa, 2013. "Environmental Management Policy Under International Carbon Leakage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 1057-1083, August.
    3. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris Nanterre, EconomiX.
    4. Ritter, Hendrik & Zimmermann, Karl, 2019. "Cap-and-Trade Policy vs. Carbon Taxation: Of Leakage and Linkage," EconStor Preprints 197796, ZBW - Leibniz Information Centre for Economics.
    5. Sungwan Hong & Seung-Gyu Sim, 2018. "Inelastic Supply of Fossil Energy and Competing Environmental Regulatory Policies," Sustainability, MDPI, vol. 10(2), pages 1-17, January.
    6. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    7. Peter H. Egger & Christoph Jessberger & Mario Larch, 2013. "Impacts of Trade and the Environment on Clustered Multilateral Environmental Agreements," The World Economy, Wiley Blackwell, vol. 36(3), pages 331-348, March.
    8. Liyuan Liu & Jing Zhu & Yibin Zhang & Xiding Chen, 2020. "An Optimal Pollution Control Model for Environmental Protection Cooperation between Developing and Developed Countries," IJERPH, MDPI, vol. 17(11), pages 1-20, May.
    9. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
    10. MacKenzie, Ian A., 2011. "Tradable permit allocations and sequential choice," Resource and Energy Economics, Elsevier, vol. 33(1), pages 268-278, January.
    11. Liu, Liyuan & Peng, Fei, 2015. "Environmental Protection and Economic Growth: An Optimal Pollution Controlling Model," MPRA Paper 76261, University Library of Munich, Germany.
    12. Jared C. Carbone, 2021. "Prices vs. Quantities in International Pollution Regulation," Working Papers 2021-01, Colorado School of Mines, Division of Economics and Business.

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