IDEAS home Printed from https://ideas.repec.org/a/bla/manchs/v90y2022i4p385-408.html
   My bibliography  Save this article

Environmental policy instruments and ownership of firms

Author

Listed:
  • Juan Carlos Bárcena‐Ruiz
  • María Begoña Garzón

Abstract

We assume an economy comprising two countries, with one polluting firm located in each country and transboundary spillovers. Each government may implement an environmental tax or an emission standard to control pollutant emissions. Investors from each country own a percentage of the stock in their local firm and in the firm located abroad. We find that the ownership structure of firms that compete in international markets affects the design of environmental policies by governments. In equilibrium, governments implement emission standards if the stake held by domestic investors in the firm located abroad is small enough. When that stake is intermediate in size and transboundary spillovers are high enough, identical governments choose different environmental policies. Finally, when the stake is large enough both governments implement environmental taxes.

Suggested Citation

  • Juan Carlos Bárcena‐Ruiz & María Begoña Garzón, 2022. "Environmental policy instruments and ownership of firms," Manchester School, University of Manchester, vol. 90(4), pages 385-408, July.
    • Handle: RePEc:bla:manchs:v:90:y:2022:i:4:p:385-408
    DOI: 10.1111/manc.12412
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/manc.12412
    Download Restriction: no
    File URL: https://libkey.io/10.1111/manc.12412?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ming Lin & Toshihiro Matsumura, 2012. "Presence of foreign investors in privatized firms and privatization policy," Journal of Economics, Springer, vol. 107(1), pages 71-80, September.
    2. Buchanan, James M & Tullock, Gordon, 1975. "Polluters' Profits and Political Response: Direct Controls Versus Taxes," American Economic Review, American Economic Association, vol. 65(1), pages 139-147, March.
    3. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-1041, December.
    4. Shuichi Ohori, 2006. "Optimal Environmental Tax and Level of Privatization in an International Duopoly," Journal of Regulatory Economics, Springer, vol. 29(2), pages 225-233, March.
    5. Baron, David P., 1985. "Regulation of prices and pollution under incomplete information," Journal of Public Economics, Elsevier, vol. 28(2), pages 211-231, November.
    6. Markusen, James R., 1997. "Costly pollution abatement, competitiveness and plant location decisions," Resource and Energy Economics, Elsevier, vol. 19(4), pages 299-320, November.
    7. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
    8. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    9. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
    10. Ayse M. Erdogan, 2014. "Foreign Direct Investment And Environmental Regulations: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 943-955, December.
    11. Michael Hoel, 1998. "Emission Taxes versus Other Environmental Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 79-104, March.
    12. Kazuhiko Kato, 2011. "Emission quota versus emission tax in a mixed duopoly," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(1), pages 43-63, January.
    13. Holland, Stephen P., 2012. "Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 375-387.
    14. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
    15. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    16. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 229-244, August.
    17. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
    18. Shuichi Ohori, 2011. "Environmental policy instruments and foreign ownership," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(1), pages 65-78, January.
    19. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, January.
    20. Kazuharu Kiyono & Masahiro Okuno-Fujiwara, 2003. "Domestic and international strategic interactions in environment policy formation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 613-633, March.
    21. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
    22. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-634, June.
    23. Kohn, Robert E., 1997. "The effect of emission taxes and abatement subsidies on market structure: Comment," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 617-628, August.
    24. Pasquale Pazienza, 2015. "The Environmental Impact of the FDI Inflow in the Transport Sector of OECD Countries and Policy Implications," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(1), pages 105-116, March.
    25. Quan Dong & Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2019. "Privatization and environmental policy in a mixed oligopoly," Estudios de Economia, University of Chile, Department of Economics, vol. 46(2), pages 173-190, December.
    26. Clemens Heuson, 2010. "Weitzman Revisited: Emission Standards Versus Taxes with Uncertain Abatement Costs and Market Power of Polluting Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(3), pages 349-369, November.
    27. Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
    28. Burrows, Paul, 1986. "Nonconvexity induced by external costs on production: Theoretical curio or policy dilemma?," Journal of Environmental Economics and Management, Elsevier, vol. 13(2), pages 101-128, June.
    29. Besanko, David, 1987. "Performance versus design standards in the regulation of pollution," Journal of Public Economics, Elsevier, vol. 34(1), pages 19-44, October.
    30. John S. Heywood & Guangliang Ye, 2009. "Mixed Oligopoly, Sequential Entry, And Spatial Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 589-597, July.
    31. Bárcena-Ruiz, Juan Carlos & Sagasta, Amagoia, 2021. "Environmental policies with consumer-friendly firms and cross-ownership," Economic Modelling, Elsevier, vol. 103(C).
    32. Daniel L. Millimet & Santanu Roy & Aditi Sengupta, 2009. "Environmental Regulations and Economic Activity: Influence on Market Structure," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 99-118, September.
    33. Misiolek, Walter S., 1980. "Effluent taxation in monopoly markets," Journal of Environmental Economics and Management, Elsevier, vol. 7(2), pages 103-107, June.
    34. Heywood, John S. & Ye, Guangliang, 2009. "Mixed oligopoly and spatial price discrimination with foreign firms," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 592-601, September.
    35. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
    36. R. Simpson, 1995. "Optimal pollution taxation in a Cournot duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(4), pages 359-369, December.
    37. G.E. Helfand, 1999. "Standards versus Taxes in Pollution Control," Chapters, in: Jeroen C.J.M. van den Bergh (ed.), Handbook of Environmental and Resource Economics, chapter 15, Edward Elgar Publishing.
    38. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
    39. Yann Duval & Stephen Hamilton, 2002. "Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 259-271, May.
    40. Jon D. Harford & Gordon Karp, 1983. "The Effects and Efficiencies of Different Pollution Standards," Eastern Economic Journal, Eastern Economic Association, vol. 9(2), pages 79-89, Apr-Jun.
    41. Sajal Lahiri & Yoshiyasu Ono, 2007. "Relative Emission Standard versus Tax under Oligopoly: The Role of Free Entry," Journal of Economics, Springer, vol. 91(2), pages 107-128, June.
    42. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    43. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
    44. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2017. "Taxes versus standards under cross-ownership," Resource and Energy Economics, Elsevier, vol. 50(C), pages 36-50.
    Full references (including those not matched with items on IDEAS)

    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. Requate, Till, 2005. "Environmental Policy under Imperfect Competition: A Survey," Economics Working Papers 2005-12, Christian-Albrechts-University of Kiel, Department of Economics.
    2. Hirose, Kosuke & Ishihara, Akifumi & Matsumura, Toshihiro, 2024. "Tax versus regulations: Polluters’ incentives for loosening industry emission targets," Energy Economics, Elsevier, vol. 136(C).
    3. Ino, Hiroaki & Matsumura, Toshihiro, 2021. "Optimality of emission pricing policies based on emission intensity targets under imperfect competition," Energy Economics, Elsevier, vol. 98(C).
    4. Verhoef, Erik T. & Nijkamp, Peter, 1999. "Second-best energy policies for heterogeneous firms," Energy Economics, Elsevier, vol. 21(2), pages 111-134, April.
    5. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    6. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2017. "Taxes versus standards under cross-ownership," Resource and Energy Economics, Elsevier, vol. 50(C), pages 36-50.
    7. Lahiri, Sajal & Ono, Yoshiyasu, 2015. "Pollution, foreign direct investment, and welfare," Research in Economics, Elsevier, vol. 69(2), pages 238-247.
    8. Hirose, Kosuke & Ishihara, Akifumi & Matsumura, Toshihiro, 2021. "Tax versus Regulations: Robustness to Polluter Lobbying Against Near-Zero Emission Targets," MPRA Paper 108380, University Library of Munich, Germany.
    9. Jiunn‐Rong Chiou & Hung‐Yi Chen, 2022. "The Impact of Foreign Ownership on the Choice between Emission Taxes and Emission Standards," The Economic Record, The Economic Society of Australia, vol. 98(323), pages 392-404, December.
    10. Rauscher, Michael, 2001. "International trade, foreign investment, and the environment," Thuenen-Series of Applied Economic Theory 29, University of Rostock, Institute of Economics.
    11. Juan Bárcena-Ruiz & María Garzón, 2014. "Multiproduct Firms and Environmental Policy Coordination," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(3), pages 407-431, November.
    12. Clemens Heuson, 2008. "Weitzman revisited: Emission standards vs. taxes with uncertain control costs and market power of polluting firms," Discussion Paper Series 299, Universitaet Augsburg, Institute for Economics.
    13. Lambert Schoonbeek & Frans Vries, 2009. "Environmental taxes and industry monopolization," Journal of Regulatory Economics, Springer, vol. 36(1), pages 94-106, August.
    14. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2012. "Partial cross-ownership and strategic environmental policy," Resource and Energy Economics, Elsevier, vol. 34(2), pages 198-210.
    15. Dong, Quan & Chang, Yang-Ming, 2020. "Emission taxes vs. environmental standards under partial ownership arrangements," Research in Economics, Elsevier, vol. 74(3), pages 250-262.
    16. Jay S. Coggins & Andrew L. Goodkind & Jason Nguyen & Zhiyu Wang, 2019. "Price Effects, Inefficient Environmental Policy, and Windfall Profits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 637-656, March.
    17. Alejandro Caparrós & Richard E. Just & David Zilberman, 2015. "Dynamic Relative Standards versus Emission Taxes in a Putty-Clay Model," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(2), pages 277-308.
    18. Helfand, Gloria E. & Berck, Peter & Maull, Tim, 2003. "The theory of pollution policy," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 6, pages 249-303, Elsevier.
    19. Tsaur‐Chin Wu & Chin‐Ho Lin & Chia‐Jen Chang, 2024. "Carbon tariffs and environmental policy: Taxes versus standards," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(3), pages 269-302, September.
    20. Susumu Cato, 2011. "Environmental policy in a mixed market: abatement subsidies and emission taxes," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(4), pages 283-301, December.

    More about this item

    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:bla:manchs:v:90:y:2022:i:4:p:385-408. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/semanuk.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.