There has been much debate recently about the nature of environmental policy that will be set by governments concerned about the competitive advantage their industries might obtain in a world of fierce trade competition. Some claim governments will set environmental policies that are too lax, while others claim that policies will be excessively tough (in order to spur firms to innovate). Both these claims relate to the possibility that governments may distort their environmental policies for strategic reasons, and to test these claims requires modelling environmental policy in a world of imperfect competition where there are strategic gains to governments trying to manipulate markets through their environmental policies, and to producers trying to manipulate markets through their R&D decisions.There is now a considerable literature which adapts the literature on strategic international trade to include environmental policy, but this literature suffers from some limitations. Most of the models consider the cases where either only governments act strategically or only producers act strategically. A proper analysis would allow for both sets of agents to act strategically. This is done in Ulph (1993a), and in Ulph (1994). In this paper we provide a more general treatment of the issues. We allow for both governments and producers to act strategically, and for producers' R&D to reduce both costs of production and emissions, but without imposing special functional forms. We show that despite this extra generality the papers by Ulph (1993a) and Ulph (1994) effectively encompass the entire set of qualitative results that can be obtained.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1063.