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Ambitious Emissions Goal as a Strategic Preemption

Author

Listed:
  • Hiroaki Yamagami
  • Ryo Arawatari
  • Takeo Hori

Abstract

We model a political game where a policymaker pledges a domestic emissions goal in the context of instrument choice between carbon pricing (CP) and a quota approach. We show that, although the policymaker faces an emissions goal proposed from an international environmental agreement, she may pledge a more stringent emissions than the proposed level. We define this stringent goal as an “ambitious emissions goal". We show that the ambitious emissions goal acts as a strategy for the policymaker that preempts the industry's lobby in a subsequent stage. We also suppose that, if CP is introduced, a rent-seeking contest for the CP revenue refund is held. Then, if the contest is socially costly enough, CP is no longer an optimal instrument. Finally, we extend the model of one country to that of two symmetric countries. A Nash equilibrium where both countries pledge the ambitious emissions goals remains.
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Suggested Citation

  • Hiroaki Yamagami & Ryo Arawatari & Takeo Hori, 2021. "Ambitious Emissions Goal as a Strategic Preemption," Strategic Behavior and the Environment, now publishers, vol. 9(1-2), pages 145-174, July.
    • Handle: RePEc:now:jnlsbe:102.00000103
    DOI: 10.1561/102.00000103
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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