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Piecemeal Multilateral Environmental Policy Reforms under Asymmetric Oligopoly

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  • SAJAL LAHIRI
  • GEORGE SYMEONIDIS

Abstract

We develop a general two‐country model with oligopolistic interdependence in which a fixed number of firms make their output and emission decisions simultaneously. We examine the effect of multilateral reforms of emission taxes on global emission levels. With sufficient asymmetry in pollution intensities between the two countries, a proportional multilateral increase in emission tax rates can increase global emission levels. However, a multilateral equal increase of emission tax rates unambiguously reduces global emission levels. We also consider the case of free entry and exit of firms, and find a rule of multilateral reforms which unambiguously lowers total emission levels.

Suggested Citation

  • Sajal Lahiri & George Symeonidis, 2007. "Piecemeal Multilateral Environmental Policy Reforms under Asymmetric Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 885-899, October.
    • Handle: RePEc:bla:jpbect:v:9:y:2007:i:5:p:885-899
    DOI: 10.1111/j.1467-9779.2007.00336.x
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    1. Carraro,Carlo & Siniscalco,Domenico (ed.), 1997. "New Directions in the Economic Theory of the Environment," Cambridge Books, Cambridge University Press, number 9780521590891, November.
    2. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
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    Cited by:

    1. Iannucci, Gianluca & Tampieri, Alessandro, 2023. "On the evolutionary interplay between environmental CSR and emission tax," Energy Economics, Elsevier, vol. 128(C).
    2. Mahelet G. Fikru, 2013. "Environmental Policies, Mergers and Welfare," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 449-461, July-Dece.
    3. Francesca Sanna-Randaccio & Roberta Sestini & Ornella Tarola, 2017. "Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(2), pages 379-401, June.
    4. Fujiwara, Kenji, 2009. "Environmental policies in a differentiated oligopoly revisited," Resource and Energy Economics, Elsevier, vol. 31(3), pages 239-247, August.
    5. Fikru, Mahelet G. & Gautier, Luis, 2016. "Mergers in Cournot markets with environmental externality and product differentiation," Resource and Energy Economics, Elsevier, vol. 45(C), pages 65-79.
    6. Flavio M. Menezes & Jorge Pereira, 2023. "Imperfect competition, emissions tax and the Porter hypothesis," Australian Institute for Business and Economics DP022023, School of Economics, University of Queensland, Australia.
    7. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2015. "Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(2), pages 174-195, April.
    8. Fikru, Mahelet G. & Gautier, Luis, 2020. "Are big mergers welfare enhancing when there is environmental externality?," Energy Economics, Elsevier, vol. 87(C).
    9. Mahelet G. Fikru & Sajal Lahiri, 2013. "Can a Merger Take Place among Symmetric Firms?," Studies in Microeconomics, , vol. 1(2), pages 155-162, December.
    10. Luis Gautier, 2017. "Local content and emission taxes when the number of foreign firms is endogenous," Journal of Economics, Springer, vol. 122(3), pages 239-266, November.
    11. Mahelet G. Fikru & Luis Gautier, 2017. "Environmental taxation and mergers in oligopoly markets with product differentiation," Journal of Economics, Springer, vol. 122(1), pages 45-65, September.
    12. Luis Gautier, 2013. "Multilateral and unilateral policy reform of emission taxes and abatement subsidies in a two-country model with oligopolistic interdependence," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(1), pages 59-71, January.
    13. Luis Gautier, 2015. "Horizontal product differentiation and policy adjustment in the presence of abatement subsidies and emission taxes," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 4(1), pages 64-81, March.
    14. Lahiri, Sajal & Ono, Yoshiyasu, 2015. "Pollution, foreign direct investment, and welfare," Research in Economics, Elsevier, vol. 69(2), pages 238-247.
    15. Fikru, Mahelet G., 2016. "Modelling mergers among polluting firms when environmental policy is endogenous," Economic Analysis and Policy, Elsevier, vol. 49(C), pages 1-6.
    16. Gautier Luis, 2019. "The Role of Multiple Pollutants and Pollution Intensities in the Policy Reform of Taxes and Standards," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-20, July.

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