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Optimal Tariffs and Firm Technology Choice: An Environmental Approach

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  • Steffen, Nico

Abstract

This paper introduces the additional dimension of environmental concerns by a government into a setting of rent-extracting strategic trade policy with endogenous firm investment into production technologies. It considers the presence of imperfect competition, namely Cournot competition. The simple analysis highlights the importance of investment incentives caused by tariffs. Furthermore, the implications from traditional tariff considerations can be completely different to the ones derived with an environmentally conscious government. It is shown that an importing country now prefers to impose discriminatory instead of uniform tariffs in a dynamic setting with endogenous technology choices, in order to induce the exporting firms to choose a technology that exhibits lower costs in terms of emissions.

Suggested Citation

  • Steffen, Nico, 2016. "Optimal Tariffs and Firm Technology Choice: An Environmental Approach," VfS Annual Conference 2016 (Augsburg): Demographic Change 145861, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145861
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    References listed on IDEAS

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    1. Fouré, Jean & Guimbard, Houssein & Monjon, Stéphanie, 2016. "Border carbon adjustment and trade retaliation: What would be the cost for the European Union?," Energy Economics, Elsevier, vol. 54(C), pages 349-362.
    2. Edward J. Balistreri & Daniel T. Kaffine & Hidemichi Yonezawa, 2019. "Optimal Environmental Border Adjustments Under the General Agreement on Tariffs and Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1037-1075, November.
    3. Choi, Jay Pil, 1995. "Optimal tariffs and the choice of technology Discriminatory tariffs vs. the 'Most Favored Nation' clause," Journal of International Economics, Elsevier, vol. 38(1-2), pages 143-160, February.
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    5. Michael O. Moore, 2011. "Implementing Carbon Tariffs: A Fool’s Errand?," The World Economy, Wiley Blackwell, vol. 34(10), pages 1679-1702, October.
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    Cited by:

    1. Céline Bonnet & Jan Philip Schain, 2020. "An Empirical Analysis Of Mergers: Efficiency Gains And Impact On Consumer Prices," Journal of Competition Law and Economics, Oxford University Press, vol. 16(1), pages 1-35.

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    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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