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Environmental Dumping, Transboundary Pollution And Asymmetric Information, Some Insights For The Environmental Regulation Of The European Electricity Market


  • Andrea Bigano

    () (K.U.Leuven, C.E.S., Energy, Transport and Environment)


In this paper we extend a model by A. Ulph (1997) on the relationship between free trade agreements, environmental regulation and trade under imperfect competition. Ulph's model focused on the effectiveness of harmonisation policies against ecological dumping. It turned out that harmonised policies are rarely optimal under perfect information, but some rationale for them is granted when asymmetric information between the Commission and national governments is considered. This paper analyses two extensions of that model: transboundary pollution and the inclusion of consumer's surplus. Our interest in these issues rests in their importance for the environmental regulation of the European electricity sector, where imperfect competition can be expected to prevail even after the opening of the Single Market. Allowing for consumers' surplus has a very limited impact on Ulph's conclusions, but considering transboundary pollution has important consequences. Under perfect information, it makes harmonisation a much more attractive option. Under asymmetric information, it affects the governments' incentives to misreport, making them stronger and changing the kind of report the Commission should be wary of, it calls for a much less differentiated treatment of the countries, and makes delegating the regulatory power to the Commission a more attractive option than acting non co-operatively.

Suggested Citation

  • Andrea Bigano, 2001. "Environmental Dumping, Transboundary Pollution And Asymmetric Information, Some Insights For The Environmental Regulation Of The European Electricity Market," Energy, Transport and Environment Working Papers Series ete0124, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  • Handle: RePEc:ete:etewps:ete0124

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    References listed on IDEAS

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    Cited by:

    1. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers 28598, University of Maryland, Department of Agricultural and Resource Economics.
    2. Sturm, Daniel & Ulph, Alistair, 2002. "Environment, trade, political economy and imperfect information: a survey," Discussion Paper Series In Economics And Econometrics 0204, Economics Division, School of Social Sciences, University of Southampton.

    More about this item


    Environmental Policy; International Trade; Imperfect Competition; Asymmetric Information; Electricity;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F1 - International Economics - - Trade
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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