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Strategic environmental regulation of multiple pollutants

Author

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  • Ambec, Stefan

    (Toulouse School of Economics (INRA-LERNA) and University of Gothenburg.)

  • Coria, Jessica

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

We analyze the interplay between policies aimed to control global and local pollution such as greenhouse gases and particulate matter. The two types of pollution interact in the abatement cost function of the polluting firms through economies or diseconomies of scope. They are regulated by distinct entities (global versus local), potentially with di¤erent instruments that are designed according to some specific agenda. We show that the choice of regulatory instrument and the timing of the regulations matter for efficiency. Emissions of local pollution are distorted if the local regulators anticipate that global pollution will later be regulated through emission caps. The regulation is too (not enough) stringent when abatement efforts exhibit economies (diseconomies) of scope. In contrast, we obtain e¢ ciency if the global pollutant is regulated by tax provided that the revenues from taxing emissions are redistributed to the local communities in a lump-sum way.

Suggested Citation

  • Ambec, Stefan & Coria, Jessica, 2015. "Strategic environmental regulation of multiple pollutants," Working Papers in Economics 626, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0626
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    File URL: http://hdl.handle.net/2077/40539
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    More about this item

    Keywords

    environmental regulation; multiple-pollutants; policy spillovers; emission tax; emission standard; emissions trading;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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