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Policy spillovers in the regulation of multiple pollutants

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  • Ambec, Stefan
  • Coria, Jessica

Abstract

We analyze the interplay between policies aimed to control transboundary and local pollutants 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, potentially with different 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 the local pollutant are distorted if the regulators anticipate that transboundary pollution will later be regulated through emission caps. The regulation is too stringent with diseconomies of scope, and not enough with economies of scope. In contrast, we obtain efficiency if the transboundary pollutant is regulated by emission taxes or tradable emission permits provided that the revenue from taxing emissions are redistributed to the countries in a lump-sum way and that the initial allocation of tradable emission permits is not linked to abatement costs.

Suggested Citation

  • Ambec, Stefan & Coria, Jessica, 2018. "Policy spillovers in the regulation of multiple pollutants," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 114-134.
  • Handle: RePEc:eee:jeeman:v:87:y:2018:i:c:p:114-134
    DOI: 10.1016/j.jeem.2017.05.011
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    1. repec:spr:ieaple:v:18:y:2018:i:2:d:10.1007_s10784-018-9390-4 is not listed on IDEAS
    2. repec:eee:appene:v:211:y:2018:i:c:p:1021-1029 is not listed on IDEAS
    3. Carson Reeling & Richard D. Horan & Cloé Garnache, 2018. "Multi-Pollutant Point-Nonpoint Trading with Participation Decisions: The Role of Transaction Costs," CESifo Working Paper Series 7152, CESifo Group Munich.

    More about this item

    Keywords

    Environmental regulation; Transboundary pollution; Multiple-pollutants; Co-benefits; Ancillary benefits; Emission tax; Emission standard; Tradable emissions permits;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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