Strategic Environmental Policy and International Trade - The Role of Market Conduct
AbstractIn this paper I analyse the incentives for governments and producers to act strategically in imperfectly competitive markets when there is Bertrand competition. Strategic behaviour by governments takes the form of distortions to their environmental policy from the first-best rule of equating marginal damage and marginal abatement costs. Strategic behaviour by producers implies inefficient investment in R&D. I contrast the outcomes with Bertrand competition with those in Cournot competition, which I analysed in an earlier paper (Ulph (1993a)). The main findings are: when only governments act strategically, they will set too tough environmental policy and the distortion will be greater if governments use emission standards rather than emission taxes; both results are the opposite of what happened in Cournot competition. When only producers act strategically, they under-invest in R&D (in Cournot they over-invest), but it is not possible to give a universal ranking of policy instruments. When governments and producers act strategically, this reduces the extent of government distortion of environmental policy, which is the same result as with Cournot, but for very different reasons; when governments use emission taxes then with Bertrand competition they set taxes below the first-best level, the reverse of what happens when only governments act strategically.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1065.
Date of creation: Nov 1994
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Li, Hong & Huang, Chengming & Yang, Bill Z., 2011. "Environmental Regulation, Business Innovation and International Competitiveness - Regolazione ambientale, innovazioni d’impresa e competitività internazionale," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 64(1), pages 115-128.
- Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
- Alessio D’Amato & Edilio Valentini, 2011.
"Enforcement and environmental quality in a decentralized emission trading system,"
Journal of Regulatory Economics,
Springer, vol. 40(2), pages 141-159, October.
- Edilio Valentini & Edilio Valentini, 2008. "Enforcement and Environmental Quality in a Decentralized Emission Trading System," Working Papers 2008.97, Fondazione Eni Enrico Mattei.
- BENCHEKROUN, Hassan & MURAT YILDIZ, Halis, 2010.
"Free Trade, Autarky and the Sustainability of an International Environmental Agreement,"
Cahiers de recherche
12-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Benchekroun Hassan & Yildiz Halis Murat, 2011. "Free Trade, Autarky and the Sustainability of an International Environmental Agreement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, January.
- Hassan Benchekroun & Halis Murat Yildiz, 2009. "Free Trade, Autarky And The Sustainability Of An International Environmental Agreement," Departmental Working Papers 2009-10, McGill University, Department of Economics.
- Rupayan Pal, 2009.
"Delegation and emission tax in a differentiated oligopoly,"
Indira Gandhi Institute of Development Research, Mumbai Working Papers
2009-007, Indira Gandhi Institute of Development Research, Mumbai, India.
- Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
- Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Governance Working Papers 22935, East Asian Bureau of Economic Research.
- Bartsch, Elga, 1996. "Enforcement of environmental liability in the case of uncertain causality and asymmetric information," Kiel Working Papers 755, Kiel Institute for the World Economy.
- Kenji Fujiwara, 2011.
"Market Integration and Competition in Environmental and Trade Policies,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 49(4), pages 561-572, August.
- Kenji Fujiwara, 2010. "Market Integration and Competition in Environmental and Trade Policies," Discussion Paper Series 63, School of Economics, Kwansei Gakuin University, revised Nov 2010.
- Rupayan Pal & Bibhas Saha, 2010. "Does Partial Privatization Improve the Environment?," Working Papers id:3122, eSocialSciences.
- Rupayan Pal & Bibhas Saha, 2010.
"Does partial privatization improve the environment,"
Indira Gandhi Institute of Development Research, Mumbai Working Papers
2010-018, Indira Gandhi Institute of Development Research, Mumbai, India.
- Rupayan Pal & Bibhas Saha, 2010. "Does partial privatization improve the environment?," Microeconomics Working Papers 23021, East Asian Bureau of Economic Research.
- Ferrara, Ida & Missios, Paul & Murat Yildiz, Halis, 2009. "Trading rules and the environment: Does equal treatment lead to a cleaner world?," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 206-225, September.
- Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
- Glebe, Thilo W. & Latacz-Lohmann, Uwe, 2004. "Agricultural Trade Liberalization And Strategic Environmental Policy: A Formal Analysis," 2004 Annual meeting, August 1-4, Denver, CO 20277, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Joachim Fünfgelt & Günther G. Schulze, 2011.
"Endogenous Environmental Policy when Pollution is Transboundary,"
Working Paper Series in Economics
196, University of Lüneburg, Institute of Economics.
- Joachim Fuenfgelt & Guenther G. Schulze, 2011. "Endogenous Environmental Policy when Pollution is Transboundary," Discussion Paper Series 14, Department of International Economic Policy, University of Freiburg, revised Feb 2011.
- Thilo W. Glebe, 2003. "Assessing the agricultural trade and environment interaction: Taking stock and looking ahead," Discussion Papers 022003, Technische Universität München, Environmental Economics and Agricultural Policy Group.
- Elbers, C. & Withagen, C.A.A.M., 1999. "General equilibrium models of environmental regulation and international trade," Discussion Paper 99.24, Tilburg University, Center for Economic Research.
- Stähler, Frank, 1998. "Competitiveness and environmental policies in strategic environmental policy models," Kiel Working Papers 858, Kiel Institute for the World Economy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.