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Domestic Effects of Environmental Policies with Transboundary Pollution

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  • Michel Cavagnac
  • Isabelle Péchoux

Abstract

We model environmental interaction among countries as a policy game where governments in each country use quotas or taxes as strategy variables. The environmental policy has a triple role to play: targeting domestic emissions, providing strategic advantages for domestic firms and targeting imported pollution. Using a multi-sector economic model, we show that, besides the well-known inefficiencies arising at the international level, the environmental policy may lead to purely domestic inefficiencies. JEL classification : F18 ; Q20 ; Q28.

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Bibliographic Info

Article provided by De Boeck Université in its journal Recherches économiques de Louvain.

Volume (Year): 76 (2010)
Issue (Month): 1 ()
Pages: 113-134

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Handle: RePEc:cai:reldbu:rel_761_0113

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Web page: http://www.cairn.info/revue-recherches-economiques-de-louvain.htm

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Keywords: environmental policy; transboundary pollution; multi-sector model;

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References

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  1. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
  2. McAusland, Carol, 2005. "Harmonizing tailpipe policy in symmetric countries: Improve the environment, improve welfare?," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 229-251, September.
  3. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  5. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
  6. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
  7. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen.
  8. Bruvoll, Annegrete & Faehn, Taran, 2006. "Transboundary effects of environmental policy: Markets and emission leakages," Ecological Economics, Elsevier, vol. 59(4), pages 499-510, October.
  9. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, vol. 30(2), pages 209-228, May.
  10. Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
  11. Michael Hoel, 2005. "The Triple Inefficiency of Uncoordinated Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 157-173, 03.
  12. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
  13. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
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