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Second Best Environemntal Policies Under Uncertainty


  • Panos Hatzipanayotou

    () (Athens University of Economics and Business)

  • Fabio Antoniou

    () (Athens University of Economics and Business)

  • Phoebe Koundouri

    (Dept. of International and European Economic Studies, Athens University of Economics and Business)


We construct a strategic trade model of an international duopoly, whereby production by exporting frms generates a local pollutant. Governments use environmental policies, i.e., an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to their .rm, however, governments are unable to perfectly foresee the actual level of demand, the cost of abatement and the damage caused from pollution. Under these modes of uncertainty we derive su�¢ cient conditions under which the governments optimally choose an emissions tax over an emissions standard.

Suggested Citation

  • Panos Hatzipanayotou & Fabio Antoniou & Phoebe Koundouri, "undated". "Second Best Environemntal Policies Under Uncertainty," DEOS Working Papers 1005, Athens University of Economics and Business.
  • Handle: RePEc:aue:wpaper:1005

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    References listed on IDEAS

    1. Stelios Arvanitis & Antonis Demos, 2012. "Valid Locally Uniform Edgeworth Expansions Under Weak Dependence and Sequences of Smooth Transformations," DEOS Working Papers 1229, Athens University of Economics and Business, revised 24 Aug 2012.
    2. Magdalinos, Michael A., 1992. "Stochastic Expansions and Asymptotic Approximations," Econometric Theory, Cambridge University Press, vol. 8(03), pages 343-367, September.
    3. Corradi, Valentina & Iglesias, Emma M., 2008. "Bootstrap refinements for QML estimators of the GARCH(1,1) parameters," Journal of Econometrics, Elsevier, vol. 144(2), pages 500-510, June.
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    Cited by:

    1. Shreekar Pradhan & J. Scott Holladay & Mohammed Mohsin & Shreekar Pradhan, 2015. "Environmental Policy Instruments and Uncertainties Under Free Trade and Capital Mobility," EcoMod2015 8102, EcoMod.
    2. Evangelos V. Dioikitopoulos & Sugata Ghosh & Eugenia Vella, 2016. "Technological Progress, Time Perception and Environmental Sustainability," Working Papers 2016002, The University of Sheffield, Department of Economics.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy


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