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The Triple Inefficiency of Uncoordinated Environmental Policies

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  • Michael Hoel

Abstract

When pollution is transboundary and there is international trade, a domestic inefficiency may arise in addition to the well-known inefficiencies at the international level. More precisely, there will be a Nash equilibrium in which each country chooses a policy that gives it lower welfare than would otherwise be possible given the emission levels of all countries. However, there will also be a Nash equilibrium in which each country chooses tradable emission quotas as its policy instrument to achieve its desired level of emissions. In this Nash equilibrium, welfare in each country is maximised given the emission levels of all countries. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .

Suggested Citation

  • Michael Hoel, 2005. "The Triple Inefficiency of Uncoordinated Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 157-173, March.
  • Handle: RePEc:bla:scandj:v:107:y:2005:i:1:p:157-173
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    Cited by:

    1. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris Nanterre, EconomiX.
    2. Peter H. Egger & Christoph Jessberger & Mario Larch, 2013. "Impacts of Trade and the Environment on Clustered Multilateral Environmental Agreements," The World Economy, Wiley Blackwell, vol. 36(3), pages 331-348, March.
    3. Michel Cavagnac & Isabelle Péchoux, 2010. "Domestic Effects of Environmental Policies with Transboundary Pollution," Recherches économiques de Louvain, De Boeck Université, vol. 76(1), pages 113-134.
    4. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
    5. repec:gam:jsusta:v:10:y:2018:i:2:p:287-:d:128246 is not listed on IDEAS
    6. Liu, Liyuan & Peng, Fei, 2015. "Environmental Protection and Economic Growth: An Optimal Pollution Controlling Model," MPRA Paper 76261, University Library of Munich, Germany.
    7. MacKenzie, Ian A., 2011. "Tradable permit allocations and sequential choice," Resource and Energy Economics, Elsevier, vol. 33(1), pages 268-278, January.

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