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Emission Markets Linkage and Strategic Environmental Policy

Author

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  • Fabio Antoniou
  • Panos Hatzipanayotou
  • Nikos Tsakiris

Abstract

This study develops a strategic environmental policy model with linked emission permit markets. We examine whether a cooperative outcome can emerge when exporting countries act non‐cooperatively. We endogenize the participation decision through a specific permit revenue‐sharing scheme. This allows the cooperative outcome to be sustained as a subgame perfect Nash equilibrium. Asymmetries across countries regarding abatement technologies and environmental preferences affect the optimal distribution of the permit revenue. Whenever these asymmetries remain within a certain range, the cooperative outcome in the non‐cooperative solution is implementable.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2025. "Emission Markets Linkage and Strategic Environmental Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 27(6), December.
    • Handle: RePEc:bla:jpbect:v:27:y:2025:i:6:n:e70089
    DOI: 10.1111/jpet.70089
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