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Optimal Environmental Policy Differentials under Emissions Constraints

Author

Listed:
  • Raymond J.G.M. Florax

    (Vrije Universiteit Amsterdam, and University of Illinois)

  • Abay Mulatu

    (London School of Economics, London, UK)

  • Cees A. Withagen

    (Vrije Universiteit van Amsterdam, and Tilburg University)

Abstract

Is there a case to be made for preferential treatment of the exposed sector in an economy when compliance to an aggregate emissions constraint induced by an international environmental agreement is mandatory? This question is being debated in many countries, including The Netherlands, in the context of the implementation of the Kyoto protocol. We address this issue in a general equilibrium framework in this paper, and theoretically cover several market structures, including perfect competition, oligopoly and the large country case. Our main finding is that in many circumstances preferential treatment is not warranted from the point of view of maximizing social welfare.

Suggested Citation

  • Raymond J.G.M. Florax & Abay Mulatu & Cees A. Withagen, 2003. "Optimal Environmental Policy Differentials under Emissions Constraints," Tinbergen Institute Discussion Papers 03-080/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030080
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    Citations

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    Cited by:

    1. Richard Nahuis & Paul Tang, 2005. "Environmental policy competition and differential tax treatment; a case for tighter coordination?," CPB Discussion Paper 50.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

    ecological dumping; general equilibrium; emissions constraints; Kyoto protocol;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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