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Tariff and environmental policies with product standards

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  • Chi‐Chur Chao
  • Jean‐Pierre Laffargue
  • Pasquale M. Sgro

Abstract

For a small open economy with consumption‐based pollution emissions, the first‐best optimal policy prescription is free trade along with a Pigouvian tax on emissions. Therefore, a package of coordinated tax reform by replacing tariffs with emission taxes can lower pollution emissions and increase market access and hence improve residents’ welfare and government revenue, as long as the initial tariffs are relatively high. Numerical simulations confirm the results obtained. Dans une petite économie ouverte avec émissions polluantes en provenance de la consommation, la prescription politique optimale de premier ordre est le libre échange avec une taxe Pigouvienne sur les émissions. Donc, un ensemble de mesures coordonnées de réforme fiscale pour remplacer les tarifs par des taxes sur les émissions peut réduire les émissions polluantes et accroître l’accès au marché, et en conséquence améliorer le bien‐être des résidents et les revenus du gouvernement, tout au moins si les tarifs initiaux sont relativement élevés. Des simulations numériques confirment ces résultats.

Suggested Citation

  • Chi‐Chur Chao & Jean‐Pierre Laffargue & Pasquale M. Sgro, 2012. "Tariff and environmental policies with product standards," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 978-995, August.
    • Handle: RePEc:wly:canjec:v:45:y:2012:i:3:p:978-995
    DOI: 10.1111/j.1540-5982.2012.01723.x
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    Cited by:

    1. Michael S. Michael & Panos Hatzipanayotou & Nikos Tsakiris, 2023. "Can Small Economies Act Strategically? The Case of Consumption Pollution and Non-tradable Goods," DEOS Working Papers 2312, Athens University of Economics and Business.
    2. Nikos Tsakiris & Michael Michael & Panos Hatzipanayotou, 2014. "Asymmetric Tax Policy Responses in Large Economies With Cross-Border Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(4), pages 563-578, August.
    3. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2019. "On the Principles of Commodity Taxation under Interregional Externalities," University of Cyprus Working Papers in Economics 03-2019, University of Cyprus Department of Economics.
    4. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    5. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.
    6. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2016. "On the Efficiency of Destination and Origin Commodity Taxation in the Presence of Consumption Generated Cross-Border Pollution," CESifo Working Paper Series 6221, CESifo.

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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