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Domestic Effects of Environmental Poclicies with Transboundary Pollution

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  • Michel Cavagnac

    (Toulouse School of Economics (LERNA))

  • Isabelle Péchoux

    (Toulouse School of Economics (ARQADE))

Abstract

We model environmental interaction among countries as a policy game where government in each country use quotas or taxes as a strategy variables. The environmental policy has a triple role to play : targeting domestic emission, 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.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2010014.

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Length: 21
Date of creation: 01 Mar 2010
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Handle: RePEc:ctl:louvre:2010014

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Keywords: Environmental policy; Transboundary Pollution; Multi-sector Model;

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  1. Bruvoll, Annegrete & Faehn, Taran, 2006. "Transboundary effects of environmental policy: Markets and emission leakages," Ecological Economics, Elsevier, Elsevier, vol. 59(4), pages 499-510, October.
  2. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, Elsevier, vol. 30(2), pages 209-228, May.
  3. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 877-92, September.
  4. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen.
  5. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 716-37, September.
  6. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, Elsevier, vol. 18(1-2), pages 83-100, February.
  7. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  8. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
  9. 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.
  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. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
  12. 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.
  13. Michael Hoel, 2005. "The Triple Inefficiency of Uncoordinated Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 107(1), pages 157-173, 03.
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