The political economy of environmental regulations and industry compensation
AbstractThis paper uses a political-economy framework to analyze what consequences the exogenous introduction of a quantitative restriction on total emissions in a small open economy has on the stringency of domestic trade policy. The question is whether and to what extent the government, if it takes different lobby groups´ interests into consideration, has an incentive to compensate the polluting industry for stricter environmental regulations by granting higher protection to it. It turns out that the government will indeed tend to increase subsidization of the industry affected by environmental regulation. This compensation will even be more than complete as long as environmental interests are taken into account. Hence, contrary to what might be expected, a net benefit for the polluting sector arises from environmental restrictions. --
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Bibliographic InfoPaper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 65.
Date of creation: 2007
Date of revision:
environmental regulations; international competitiveness; political;
Find related papers by JEL classification:
- F18 - International Economics - - Trade - - - Trade and Environment
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gernot Klepper & Sonja Peterson, 2004.
"The EU Emissions Trading Scheme. Allowance Prices, Trade Flows, Competitiveness Effects,"
2004.49, Fondazione Eni Enrico Mattei.
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- Fredriksson, P.G., 1999. "Trade, Global Policy, and the Environment," World Bank - Discussion Papers 402, World Bank.
- Abay Mulatu & Raymond J.G.M. Florax & Cees A. Withagen, 2004. "Environmental Regulation and International Trade," Tinbergen Institute Discussion Papers 04-020/3, Tinbergen Institute.
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