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Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?

Author

Listed:
  • Claudia Ranocchia

    (University of Bologna)

  • Luca Lambertini

    (University of Bologna)

Abstract

The Porter hypothesis and the pollution haven hypothesis seem to predict opposite reactions by firms facing environmental regulation, as the first invokes the arising of a win–win solution while the second envisages the possibility for firms to flee abroad. We illustrate the possibility of designing policies (taking the form of either emission taxation or environmental standards) able to eliminate firms’ incentives to relocate their plants abroad and create a parallel incentive for them to deliver a win–win solution by investing either in replacement technologies under emission taxation, or in abatement technologies under an environmental standard. This is worked out in a Cournot supergame in which firms may activate the highest level of collusion compatible with their intertemporal preferences.

Suggested Citation

  • Claudia Ranocchia & Luca Lambertini, 2021. "Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(1), pages 177-199, January.
  • Handle: RePEc:kap:enreec:v:78:y:2021:i:1:d:10.1007_s10640-020-00533-x
    DOI: 10.1007/s10640-020-00533-x
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    Cited by:

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    4. Zhang, Cheng & Zhao, Ziwei & Wang, Qunwei & Xu, Bing, 2022. "Title: Holistic governance strategy to reduce carbon intensity," Technological Forecasting and Social Change, Elsevier, vol. 179(C).

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    More about this item

    Keywords

    Implicit collusion; Win–win solution; Relocation; Green technology; Emission taxation; Environmental standard;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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