IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/29798.html
   My bibliography  Save this paper

Policy spillovers in the regulation of multiple pollutants

Author

Listed:
  • Ambec, Stefan
  • Coria, Jessica

Abstract

We analyze the interplay between policies aimed to control transboundary and local pollu- tants such as greenhouse gases and particulate matter. The two types of pollution interact in the abatement cost function of the polluting firms through economies or diseconomies of scope. They are regulated by distinct entities, potentially with different instruments that are designed according to some specific agenda. We show that the choice of regulatory instrument and the timing of the regulations matter for efficiency. Emissions of the local pollutant are distorted if the regulators anticipate that transboundary pollution will later be regulated through emission caps. The regulation is too stringent with diseconomies of scope, and not enough with economies of scope. In contrast, we obtain efficiency if the transboundary pollutant is regulated by tax provided that the revenues from taxing emissions are redistributed to the local communities in a lump-sum way.

Suggested Citation

  • Ambec, Stefan & Coria, Jessica, 2015. "Policy spillovers in the regulation of multiple pollutants," TSE Working Papers 15-602, Toulouse School of Economics (TSE), revised Jan 2017.
    • Handle: RePEc:tse:wpaper:29798
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2015/wp_tse_602.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harstad, Bård & Eskeland, Gunnar S., 2010. "Trading for the future: Signaling in permit markets," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 749-760, October.
    2. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    3. Ambec, Stefan & Coria, Jessica, 2013. "Prices vs quantities with multiple pollutants," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 123-140.
    4. Sterner, Thomas & Muller, Adrian, 2006. "Output and Abatement Effects of Allocation Readjustment in Permit Trade," RFF Working Paper Series dp-06-49, Resources for the Future.
    5. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    6. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
    7. , & ,, 2010. "Common agency and public good provision under asymmetric information," Theoretical Economics, Econometric Society, vol. 5(2), May.
    8. Frederick van der Ploeg & Cees Withagen, 2015. "Global Warming and the Green Paradox: A Review of Adverse Effects of Climate Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(2), pages 285-303.
    9. Martin L. Weitzman, 2014. "Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 29-49.
    10. Williams, Roberton C., 2012. "Growing state–federal conflicts in environmental policy: The role of market-based regulation," Journal of Public Economics, Elsevier, vol. 96(11), pages 1092-1099.
    11. Scott Barrett & Robert Stavins, 2003. "Increasing Participation and Compliance in International Climate Change Agreements," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 3(4), pages 349-376, December.
    12. Fei Teng & Alun Gu, 2007. "Climate Change: National and Local Policy Opportunities in China," Working Papers 2007.74, Fondazione Eni Enrico Mattei.
    13. Alan Williams, 1966. "The Optimal Provision of Public Goods in a System of Local Government," Journal of Political Economy, University of Chicago Press, vol. 74(1), pages 18-33.
    14. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 567-586.
    15. John K. Stranlund & Insung Son, 2019. "Prices Versus Quantities Versus Hybrids in the Presence of Co-pollutants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 353-384, June.
    16. Legras, Sophie, 2011. "Incomplete model specification in a multi-pollutants setting: The case of climate change and acidification," Resource and Energy Economics, Elsevier, vol. 33(3), pages 527-543, September.
    17. Ian Parry & Chandara Veung & Dirk Heine, 2015. "How Much Carbon Pricing Is In Countries’ Own Interests? The Critical Role Of Co-Benefits," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 1-26, November.
    18. Bohringer, Christoph & Lange, Andreas, 2005. "On the design of optimal grandfathering schemes for emission allowances," European Economic Review, Elsevier, vol. 49(8), pages 2041-2055, November.
    19. Don Fullerton & Daniel H. Karney, 2014. "Multiple Pollutants, Uncovered Sectors, and Suboptimal Environmental Policies," NBER Working Papers 20334, National Bureau of Economic Research, Inc.
    20. David P. Baron, 1985. "Noncooperative Regulation of a Nonlocalized Externality," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 553-568, Winter.
    21. Pittel, Karen & Rübbelke, Dirk T.G., 2008. "Climate policy and ancillary benefits: A survey and integration into the modelling of international negotiations on climate change," Ecological Economics, Elsevier, vol. 68(1-2), pages 210-220, December.
    22. Bonilla, Jorge & Coria, Jessica & Mohlin, Kristina & Sterner, Thomas, 2015. "Refunded emission payments and diffusion of NOx abatement technologies in Sweden," Ecological Economics, Elsevier, vol. 116(C), pages 132-145.
    23. Sophie Legras, 2011. "Incomplete model specification in a multi-pollutants setting : the case of climate change and acidification," Post-Print hal-02652318, HAL.
    24. Moslener, Ulf & Requate, Till, 2007. "Optimal abatement in dynamic multi-pollutant problems when pollutants can be complements or substitutes," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2293-2316, July.
    25. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    26. Antoniou, Fabio & Kyriakopoulou, Efthymia, 2015. "On The Strategic Effect of International Permits Trading on Local Pollution: The Case of Multiple Pollutants," Working Papers in Economics 610, University of Gothenburg, Department of Economics.
    27. Michael Finus & Dirk Rübbelke, 2013. "Public Good Provision and Ancillary Benefits: The Case of Climate Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 211-226, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suvrat Dhanorkar & Suresh Muthulingam, 2020. "Do E‐Waste Laws Create Behavioral Spillovers? Quasi‐Experimental Evidence from California," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1738-1766, July.
    2. Jing Xu, 2018. "International environmental agreements with agenda and interaction between pollutants," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(2), pages 153-174, April.
    3. Daniel Jaqua & Daniel Schaffa, 2022. "The case for subsidizing harm: constrained and costly Pigouvian taxation with multiple externalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(2), pages 408-442, April.
    4. John K. Stranlund & Insung Son, 2019. "Prices Versus Quantities Versus Hybrids in the Presence of Co-pollutants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 353-384, June.
    5. Ju, Biung-Ghi & Kim, Min & Kim, Suyi & Moreno-Ternero, Juan D., 2021. "Fair international protocols for the abatement of GHG emissions," Energy Economics, Elsevier, vol. 94(C).
    6. Meier, Jan-Niklas & Lehmann, Paul, 2022. "Optimal federal co-regulation of renewable energy deployment," Resource and Energy Economics, Elsevier, vol. 70(C).
    7. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(C).
    8. Li-Jing Liu & Qiao-Mei Liang & Felix Creutzig & Nan Cheng & Lan-Cui Liu, 2021. "Electricity end-use and construction activity are key leverage points for co-controlling greenhouse gases and local pollution in China," Climatic Change, Springer, vol. 167(1), pages 1-22, July.
    9. Sterner, Thomas & Ewald, Jens & Sterner, Erik, 2024. "Economists and the climate," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    10. Chen, Wanxu & Chi, Guangqing, 2022. "Urbanization and ecosystem services: The multi-scale spatial spillover effects and spatial variations," Land Use Policy, Elsevier, vol. 114(C).
    11. Linn, Joshua, 2022. "Balancing Equity and Effectiveness for Electric Vehicle Subsidies," RFF Working Paper Series 22-07, Resources for the Future.
    12. Lawrence D. LaPlue & Christopher A. Erickson, 2020. "Outsourcing, trade, technology, and greenhouse gas emissions," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(2), pages 217-245, April.
    13. Gautier Luis, 2019. "The Role of Multiple Pollutants and Pollution Intensities in the Policy Reform of Taxes and Standards," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-20, July.
    14. Yuanyuan Mao & Lingli Hou & Zhengdong Zhang, 2021. "Spatial-Temporal Evolution and Relationship between Urbanization Level and Ecosystem Service from a Dual-Scale Perspective: A Case Study of the Pearl River Delta Urban Agglomeration," Sustainability, MDPI, vol. 13(15), pages 1-20, July.
    15. Zhang, Xiao-Bing & Xu, Jing, 2018. "Optimal policies for climate change: A joint consideration of CO2 and methane," Applied Energy, Elsevier, vol. 211(C), pages 1021-1029.
    16. Fabio Antoniou & Efthymia Kyriakopoulou, 2019. "On the Strategic Effect of International Permits Trading on Local Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1299-1329, November.
    17. Meya, Jasper N. & Neetzow, Paul, 2021. "Renewable energy policies in federal government systems," Energy Economics, Elsevier, vol. 101(C).
    18. Jasper Meya & Paul Neetzow, 2019. "Renewable energy policies in federal government systems," Working Papers V-423-19, University of Oldenburg, Department of Economics, revised Jul 2019.
    19. Carson Reeling & Richard D. Horan & Cloé Garnache, 2018. "Multi-Pollutant Point-Nonpoint Trading with Participation Decisions: The Role of Transaction Costs," CESifo Working Paper Series 7152, CESifo.
    20. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.
    21. Meier, Jan-Niklas & Lehmann, Paul, 2020. "Optimal federal co-regulation of renewable energy deployment," UFZ Discussion Papers 8/2020, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    22. Gren, Ing-Marie & Ang, Frederic, 2019. "Stacking of abatement credits for cost-effective achievement of climate and water targets," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    23. Qiang Wang & Zhongfu Tan & Gejirifu De & Qingkun Tan & Lei Pu, 2019. "An Evolutionary Game Study of Clean Heating Promotion Mechanisms under the Policy Regulation in China," Sustainability, MDPI, vol. 11(14), pages 1-22, July.
    24. Chen, Quanrun & Löschel, Andreas & Pei, Jiansuo & Peters, Glen P. & Xue, Jinjun & Zhao, Zhongxiu, 2019. "Processing trade, foreign outsourcing and carbon emissions in China," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 1-12.
    25. Carson Reeling & Richard D. Horan & Cloé Garnache, 2020. "When the Levee Breaks: Can Multi‐Pollutant Markets Break the Dam on Point–Nonpoint Market Participation?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 625-640, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ambec, Stefan & Coria, Jessica, 2015. "Strategic environmental regulation of multiple pollutants," Working Papers in Economics 626, University of Gothenburg, Department of Economics.
    2. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    3. Jing Xu, 2018. "International environmental agreements with agenda and interaction between pollutants," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(2), pages 153-174, April.
    4. Fabio Antoniou & Efthymia Kyriakopoulou, 2019. "On the Strategic Effect of International Permits Trading on Local Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1299-1329, November.
    5. Reeling, Carson & Garnache, Cloé & Horan, Richard, 2018. "Efficiency gains from integrated multipollutant trading," Resource and Energy Economics, Elsevier, vol. 52(C), pages 124-136.
    6. Irene Alvarado-Quesada & Hans-Peter Weikard, 2017. "International Environmental Agreements for biodiversity conservation: a game-theoretic analysis," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(5), pages 731-754, October.
    7. Keita Honjo, 2015. "Cooperative Emissions Trading Game: International Permit Market Dominated by Buyers," PLOS ONE, Public Library of Science, vol. 10(8), pages 1-20, August.
    8. Aleksandar Zaklan, 2023. "Coase and Cap-and-Trade: Evidence on the Independence Property from the European Carbon Market," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 526-558, May.
    9. Milan Ščasný & Emanuele Massetti & Jan Melichar & Samuel Carrara, 2015. "Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 383-415, October.
    10. Hintermann, Beat, 2010. "Allowance price drivers in the first phase of the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 43-56, January.
    11. Sigit Perdana & Rod Tyers, 2020. "Global Climate Change Mitigation: Strategic Incentives," The Energy Journal, , vol. 41(3), pages 183-206, May.
    12. Guy Meunier, 2015. "Prices vs. quantities in presence of a second, unpriced, externality," Working Papers hal-01242040, HAL.
    13. Gautier Luis, 2019. "The Role of Multiple Pollutants and Pollution Intensities in the Policy Reform of Taxes and Standards," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-20, July.
    14. Gren, Ing-Marie & Ang, Frederic, 2019. "Stacking of abatement credits for cost-effective achievement of climate and water targets," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    15. Johann Wackerbauer & Jutta Albrecht-Saavedra & Marc Gronwald & Janina Ketterer & Jana Lippelt & Johannes Pfeiffer & Luise Röpke & Markus Zimmer, 2011. "Bewertung der klimapolitischen Maßnahmen und Instrumente: eine Studie im Auftrag der E.ON AG," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 51.
    16. Eichner, Thomas & Pethig, Rüdiger, 2014. "Self-enforcing environmental agreements and capital mobility," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 120-132.
    17. Jianxin Guo & Xianchun Tan & Xiaoyan Meng & Yanping Li, 2022. "Clean technology investment considering synergistic effects: a case from the steel sintering process," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(12), pages 13748-13770, December.
    18. Beat Hintermann, 2017. "Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 89-112, January.
    19. John K. Stranlund & Insung Son, 2019. "Prices Versus Quantities Versus Hybrids in the Presence of Co-pollutants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 353-384, June.
    20. Brunel, Claire & Johnson, Erik Paul, 2019. "Two birds, one stone? Local pollution regulation and greenhouse gas emissions," Energy Economics, Elsevier, vol. 78(C), pages 1-12.

    More about this item

    Keywords

    environmental regulation; transboundary pollution; multiple-pollutants; policy spillovers; emission tax; emission standard; emissions trading;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:29798. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.