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Domestic Effects of Environmental Poclicies with Transboundary Pollution

Author

Listed:
  • Michel Cavagnac

    (Toulouse School of Economics (LERNA))

  • Isabelle Péchoux

    (Toulouse School of Economics (ARQADE))

Abstract

We model environmental interaction among countries as a policy game where government in each country use quotas or taxes as a strategy variables. The environmental policy has a triple role to play : targeting domestic emission, providing strategic advantages for domestic firms and targeting imported pollution. Using a multi-sector economic model, we show that, besides the well-known inefficiencies arising at the international level, the environmental policy may lead to purely domestic inefficiencies.

Suggested Citation

  • Michel Cavagnac & Isabelle Péchoux, 2010. "Domestic Effects of Environmental Poclicies with Transboundary Pollution," Discussion Papers (REL - Recherches Economiques de Louvain) 2010014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:2010014
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    References listed on IDEAS

    as
    1. McAusland, Carol, 2005. "Harmonizing tailpipe policy in symmetric countries: Improve the environment, improve welfare?," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 229-251, September.
    2. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, vol. 30(2), pages 209-228, May.
    3. Michael Hoel, 2005. "The Triple Inefficiency of Uncoordinated Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, pages 157-173.
    4. Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
    5. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, pages 877-892.
    6. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
    7. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    8. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-840, Supplemen.
    9. Bruvoll, Annegrete & Faehn, Taran, 2006. "Transboundary effects of environmental policy: Markets and emission leakages," Ecological Economics, Elsevier, vol. 59(4), pages 499-510, October.
    10. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
    11. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
    12. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
    13. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, pages 716-737.
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    More about this item

    Keywords

    Environmental policy; Transboundary Pollution; Multi-sector Model;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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