Tradable Permits vs Ecological Dumping
AbstractIn this paper we examine an alternative policy scenario, where governments allow polluting Ãƒ??rms to trade permits in a strategic environmental policy model. We demonstrate, among other things, that with no market power in the permits market, governments of the exporting firms do not have an incentive to under-regulate pollution in order to become more competitive. This strategic effect is reversed and leads to a welfare level closer to the cooperative one and strictly higher to that when permits are non-tradable. Allowing for market power in the permits market, the incentive to under-regulate pollution re-appears regardless of whether permits are tradable or not. With tradable permits, however, the incentive to under-regulate pollution is comparatively weaker relative to the case of non-tradable permits. This entails potential benefits for the exporting Ãƒ??rms and countries since the prisonersÃƒ??dilemma is moderated.
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Bibliographic InfoPaper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1002.
Length: 28 pages
Date of creation: 01 Feb 2009
Date of revision:
Strategic environmental policy; Tradable permits; Race to the top;
Other versions of this item:
- Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2010. "Tradable Permits vs Ecological Dumping," Environmental Economy and Policy Research Working Papers 50.2010, University of Cambridge, Department of Land Economics, revised 2010.
- Panos Hatzipanayotou & Fabio Antoniou & Phoebe Koundouri, 2010. "Tradable Permits vs Ecological Dumping," Working Papers 2010.2, Fondazione Eni Enrico Mattei.
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F18 - International Economics - - Trade - - - Trade and Environment
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