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Trade, Strategic Innovation and Strategic Environmental Policy - a General Analysis

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  • Ulph, Alistair Mitchell
  • Ulph, David

Abstract

There has been much debate recently about the nature of environmental policy that will be set by governments concerned about the competitive advantage their industries might obtain in a world of fierce trade competition. Some claim governments will set environmental policies that are too lax, while others claim that policies will be excessively tough (in order to spur firms to innovate). Both these claims relate to the possibility that governments may distort their environmental policies for strategic reasons, and to test these claims requires modelling environmental policy in a world of imperfect competition where there are strategic gains to governments trying to manipulate markets through their environmental policies, and to producers trying to manipulate markets through their R&D decisions.There is now a considerable literature which adapts the literature on strategic international trade to include environmental policy, but this literature suffers from some limitations. Most of the models consider the cases where either only governments act strategically or only producers act strategically. A proper analysis would allow for both sets of agents to act strategically. This is done in Ulph (1993a), and in Ulph (1994). In this paper we provide a more general treatment of the issues. We allow for both governments and producers to act strategically, and for producers' R&D to reduce both costs of production and emissions, but without imposing special functional forms. We show that despite this extra generality the papers by Ulph (1993a) and Ulph (1994) effectively encompass the entire set of qualitative results that can be obtained.

Suggested Citation

  • Ulph, Alistair Mitchell & Ulph, David, 1994. "Trade, Strategic Innovation and Strategic Environmental Policy - a General Analysis," CEPR Discussion Papers 1063, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1063
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    Citations

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    Cited by:

    1. Mattoo, Aaditya, 2001. "Discriminatory Consequences of Non-discriminatory Standards," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 78-105.
    2. Hoel, Michael, 1997. "Coordination of environmental policy for transboundary environmental problems?," Journal of Public Economics, Elsevier, vol. 66(2), pages 199-224, November.
    3. Stähler, Frank, 1998. "Competitiveness and environmental policies in strategic environmental policy models," Kiel Working Papers 858, Kiel Institute for the World Economy (IfW).
    4. Greaker, Mads, 2006. "Spillovers in the development of new pollution abatement technology: A new look at the Porter-hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 52(1), pages 411-420, July.
    5. Emmanuel Petrakis & Joanna Poyago-Theotoky,, "undated". "Environmental Impact of Technology Policy: R&D Subsidies Versus R&D Cooperation," Discussion Papers 97/16, University of Nottingham, School of Economics.
    6. Feess Eberhard & Taistra Gregor, 2000. "Porter's Hypothesis on Environmental Policy in an Oligopoly Model with Cost Asymmetry Caused by Innovation / Porter's Hypothese zur Umweltpolitik in einem Oligopol mit asymmetrischen Kosten," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 220(1), pages 18-31, February.
    7. Greaker, Mads, 2003. "Strategic environmental policy; eco-dumping or a green strategy?," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 692-707, May.
    8. Bartsch, Elga, 1996. "Enforcement of environmental liability in the case of uncertain causality and asymmetric information," Kiel Working Papers 755, Kiel Institute for the World Economy (IfW).
    9. Naghavi, Alireza, 2007. "Can R&D-inducing green tariffs replace international environmental regulations?," Resource and Energy Economics, Elsevier, vol. 29(4), pages 284-299, November.
    10. Schmid, Stefanie U., 1997. "Umweltpolitik und internationale Wettbewerbsfähigkeit," Kiel Working Papers 823, Kiel Institute for the World Economy (IfW).
    11. Greaker, Mads & Rosendahl, Knut Einar, 2008. "Environmental policy with upstream pollution abatement technology firms," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 246-259, November.

    More about this item

    Keywords

    Environmental Policy; Imperfect Competition; Innovation; International Trade; Strategic Behaviour;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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