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Second Best Environmental Policies under Uncertainty

Author

Listed:
  • Fabio Antoniou
  • Panos Hatzipanayotou

    ()

  • Phoebe Koundouri

Abstract

We construct a strategic trade model of an international duopoly, whereby production by exporting firms 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 firm, 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 sufficient conditions under which the governments optimally choose an emissions tax over an emissions standard.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2010. "Second Best Environmental Policies under Uncertainty," Environmental Economy and Policy Research Working Papers 49.2010, University of Cambridge, Department of Land Economics, revised 2010.
  • Handle: RePEc:lnd:wpaper:492010
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    File URL: http://www.landecon.cam.ac.uk/RePEc/pdf/492010.pdf
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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.

    More about this item

    Keywords

    Strategic Environmental Policy; Pollution; Choice of Policy Instrument; Uncertainty.;

    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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