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Tradable permits vs ecological dumping when governments act non-cooperatively

Author

Listed:
  • Fabio Antoniou
  • Panos Hatzipanayotou
  • Phoebe Koundouri

Abstract

In this paper we incorporate tradable permits in a model of strategic environmental policy as an alternative policy scheme. In particular, we develop an international oligopoly model, where governments issue non-cooperatively a number of permits and then allow their trading by their polluting firms. Permits trading is a dominant strategy and it ensures that welfare is strictly higher than in a situation where permits are non-tradable. When the permits market is efficient, exporting countries have an incentive to tighten regulation in order to enhance their firms' competitiveness. Allowing for market power in the permits market, the incentive to relax regulation may re-appear, yet it is comparatively weaker relative to the case of non-tradable permits. The benefits of this policy scheme disappear if the governments along with emission permits adopt an emissions subsidy. Copyright 2014 Oxford University Press 2012 All rights reserved, Oxford University Press.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2014. "Tradable permits vs ecological dumping when governments act non-cooperatively," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 188-208, January.
  • Handle: RePEc:oup:oxecpp:v:66:y:2014:i:1:p:188-208
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    File URL: http://hdl.handle.net/10.1093/oep/gps046
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    Cited by:

    1. repec:kap:itaxpf:v:26:y:2019:i:1:d:10.1007_s10797-018-9503-6 is not listed on IDEAS
    2. Baran Doda & Simon Quemin, 2018. "Linking Permit Markets Multilaterally," Working Papers 1804, Chaire Economie du climat.
    3. repec:wly:soecon:v:84:y:2017:i:1:p:317-336 is not listed on IDEAS
    4. repec:bla:jpbect:v:19:y:2017:i:2:p:267-288 is not listed on IDEAS
    5. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2015. "Emission Permits and Public Pollution Abatement:: Can Decentralized Environmental Policies be Efficient?," CESifo Working Paper Series 5278, CESifo Group Munich.
    6. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2017. "Welfare Ranking of Environmental Policies in the Presence of Capital Mobility and Cross‐Border Pollution," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 317-336, July.
    7. repec:kap:enreec:v:74:y:2019:i:3:d:10.1007_s10640-019-00369-0 is not listed on IDEAS
    8. repec:kap:enreec:v:72:y:2019:i:2:d:10.1007_s10640-017-0202-z is not listed on IDEAS
    9. repec:aue:wpaper:1509 is not listed on IDEAS
    10. Alvarez, Francisco & André, Francisco J., 2015. "Auctioning emission permits in a leader-follower setting," MPRA Paper 61698, University Library of Munich, Germany.
    11. repec:taf:jitecd:v:26:y:2017:i:2:p:195-208 is not listed on IDEAS
    12. Harvey E. Lapan & Shiva Sikdar, 2017. "Can Trade Be Good for the Environment?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 267-288, April.
    13. Antoniou, Fabio & Kyriakopoulou, Efthymia, 2015. "On The Strategic Effect of International Permits Trading on Local Pollution: The Case of Multiple Pollutants," Working Papers in Economics 610, University of Gothenburg, Department of Economics.

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