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Strategic Choice of Domestic Environmental Policy Instrument and International Emissions Trading Scheme in an Open Economy with Imperfect Competition

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  • Boom, Jan Tjeerd

Abstract

This paper presents a model of imperfect international competition. Within this framework, the optimal choice of national environmental policy instrument and international emissions trading scheme is discussed. The choice of national instrument is restricted to absolute and relative standards, which form the basis for permit and credit trading respectively. It is shown that relatives standards and credit trading lead to higher output than emission ceilings and permit trading. I find that governments want to increase production beyond the level reached with emission ceilings and therefore prefer relative standards. Furthermore, international emissions trading is only optimal when the country imports emission quotas, and in several cases, governments will choose not to allow international emissions trading.

Suggested Citation

  • Boom, Jan Tjeerd, 2003. "Strategic Choice of Domestic Environmental Policy Instrument and International Emissions Trading Scheme in an Open Economy with Imperfect Competition," Unit of Economics Working Papers 24177, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    • Handle: RePEc:ags:rvaewp:24177
    DOI: 10.22004/ag.econ.24177
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    References listed on IDEAS

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