IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v78y2021i1d10.1007_s10640-020-00533-x.html
   My bibliography  Save this article

Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?

Author

Listed:
  • Claudia Ranocchia

    (University of Bologna)

  • Luca Lambertini

    (University of Bologna)

Abstract

The Porter hypothesis and the pollution haven hypothesis seem to predict opposite reactions by firms facing environmental regulation, as the first invokes the arising of a win–win solution while the second envisages the possibility for firms to flee abroad. We illustrate the possibility of designing policies (taking the form of either emission taxation or environmental standards) able to eliminate firms’ incentives to relocate their plants abroad and create a parallel incentive for them to deliver a win–win solution by investing either in replacement technologies under emission taxation, or in abatement technologies under an environmental standard. This is worked out in a Cournot supergame in which firms may activate the highest level of collusion compatible with their intertemporal preferences.

Suggested Citation

  • Claudia Ranocchia & Luca Lambertini, 2021. "Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(1), pages 177-199, January.
    • Handle: RePEc:kap:enreec:v:78:y:2021:i:1:d:10.1007_s10640-020-00533-x
    DOI: 10.1007/s10640-020-00533-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10640-020-00533-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10640-020-00533-x?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    2. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(1), pages 1-12.
    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. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 1998. "Standardization and the stability of collusion," Economics Letters, Elsevier, vol. 58(3), pages 303-310, March.
    5. Petrakis, Emmanuel & Xepapadeas, Anastasios, 2003. "Location decisions of a polluting firm and the time consistency of environmental policy," Resource and Energy Economics, Elsevier, vol. 25(2), pages 197-214, May.
    6. Jeanine Miklós-Thal, 2011. "Optimal collusion under cost asymmetry," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(1), pages 99-125, January.
    7. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    8. Luca Lambertini, 2017. "Green Innovation and Market Power," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 231-252, October.
    9. Damania, D., 1996. "Pollution Taxes and Pollution Abatement in an Oligopoly Supergame," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 323-336, May.
    10. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    11. Alistair Ulph & Laura Valentini, 2001. "Is Environmental Dumping Greater when Plants are Footloose?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 673-688, December.
    12. Ralf Martin & Mirabelle Mu?ls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," American Economic Review, American Economic Association, vol. 104(8), pages 2482-2508, August.
    13. repec:clg:wpaper:2008-02 is not listed on IDEAS
    14. repec:bla:scandj:v:103:y:2001:i:4:p:673-88 is not listed on IDEAS
    15. Cabral, Luis M. B., 2000. "R&D cooperation and product market competition," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1033-1047, October.
    16. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    17. Levin, Dan, 1985. "Taxation within Cournot oligopoly," Journal of Public Economics, Elsevier, vol. 27(3), pages 281-290, August.
    18. Andr, Francisco J. & Gonzlez, Paula & Porteiro, Nicols, 2009. "Strategic quality competition and the Porter Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 57(2), pages 182-194, March.
    19. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June.
    20. 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.
    21. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    22. Kaz Miyagiwa, 2009. "Collusion And Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 768-784, December.
    23. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-840, Supplemen.
    24. Requate, Till & Unold, Wolfram, 2003. "Environmental policy incentives to adopt advanced abatement technology:: Will the true ranking please stand up?," European Economic Review, Elsevier, vol. 47(1), pages 125-146, February.
    25. Requate, Till, 2005. "Dynamic incentives by environmental policy instruments--a survey," Ecological Economics, Elsevier, vol. 54(2-3), pages 175-195, August.
    26. Levy, Nadav, 2012. "Technology sharing and tacit collusion," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 204-216.
    27. Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, February.
    28. Schmidt, Robert C. & Heitzig, Jobst, 2014. "Carbon leakage: Grandfathering as an incentive device to avert firm relocation," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 209-223.
    29. Harrington, Joseph E, Jr, 1991. "The Determination of Price and Output Quotas in a Heterogeneous Cartel," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 767-792, November.
    30. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
    31. Don Fullerton (ed.), 2006. "The Economics of Pollution Havens," Books, Edward Elgar Publishing, number 3962.
    32. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
    33. Daniel Nachtigall, 2019. "Dynamic Climate Policy Under Firm Relocation: The Implications of Phasing Out Free Allowances," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 473-503, September.
    34. Christos Constantatos & Markus Herrmann, 2011. "Market Inertia and the Introduction of Green Products: Can Strategic Effects Justify the Porter Hypothesis?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(2), pages 267-284, October.
    35. 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.
    36. Luca Lambertini, 2017. "Green Innovation and Market Power," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 231-252, October.
    37. repec:bla:scandj:v:97:y:1995:i:3:p:411-20 is not listed on IDEAS
    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. Wen, Shiyan & Jia, Zhijie, 2022. "The energy, environment and economy impact of coal resource tax, renewable investment, and total factor productivity growth," Resources Policy, Elsevier, vol. 77(C).
    2. Zhang, Cheng & Zhao, Ziwei & Wang, Qunwei & Xu, Bing, 2022. "Title: Holistic governance strategy to reduce carbon intensity," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    3. Tu, Haiqiang & Zhou, Zhenhua, 2023. "Resilience and the sustainability: Harnessing efficiency in the natural resources markets for recovery," Resources Policy, Elsevier, vol. 86(PB).
    4. Song, Hao & Zhao, Xiaoxia, 2024. "The unexpected consequences of company bankruptcy: An investigation into the spillover effect of local economic liquidation," Finance Research Letters, Elsevier, vol. 61(C).
    5. Nejati, Mehdi & Shah, Muhammad Ibrahim, 2023. "How does ICT trade shape environmental impacts across the north-south regions? Intra-regional and Inter-regional perspective from dynamic CGE model," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    6. Li, Yu & Yaacob, Mohd Hasimi & Xie, Tao, 2024. "Effects of China's low carbon pilot city policy on corporate green innovation: Considering the mediating role of public environmental concern," Finance Research Letters, Elsevier, vol. 65(C).
    7. Elettra Agliardi & Luca Lambertini, 2024. "To Abate, or Not to Abate? The Arising of the Win–Win Solution Under Time Consistent Emission Taxation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(6), pages 1389-1405, June.
    8. Chi-Hui Wang & Prasad Padmanabhan & Chia-Hsing Huang, 2021. "The Impact of Renewable Energy, Urbanization, and Environmental Sustainability Ratings on the Environmental Kuznets Curve and the Pollution Haven Hypothesis," Sustainability, MDPI, vol. 13(24), pages 1-22, December.
    9. Xiuguo Wu & Yibai Meng, 2022. "Evaluation and Selection of Cement Suppliers under the Background of New and Old Driving Energy Conversion in China," Sustainability, MDPI, vol. 14(18), pages 1-21, September.
    10. Hanxiao Wei & Huiqin Yao, 2022. "Environmental Regulation, Roundabout Production, and Industrial Structure Transformation and Upgrading: Evidence from China," Sustainability, MDPI, vol. 14(7), pages 1-17, March.
    11. Zhou, Kuo & Qu, Zhi & Wei, Zhixuan & Zhao, Jiyang, 2023. "Does government fiscal pressure matter for firm environmental performance? The role of environmental regulation and tax competition," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1187-1204.
    12. Shuhong Wang & Yuqing He & Hanxue Chen, 2023. "Can raising trade barriers curb industrial pollution emissions?," Energy & Environment, , vol. 34(7), pages 2454-2477, November.
    13. Shenhai Huang & Chao Du & Xian Jin & Daini Zhang & Shiyan Wen & Yu’an Wang & Zhenyu Cheng & Zhijie Jia, 2022. "The Boundary of Porter Hypothesis: The Energy and Economic Impact of China’s Carbon Neutrality Target in 2060," Energies, MDPI, vol. 15(23), pages 1-18, December.
    14. Luxin Yang & Yucheng Liu & Huihui Deng, 2023. "Environmental governance, local government competition and industrial green transformation: Evidence from China's sustainable development practice," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(2), pages 1054-1068, April.

    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. Flavio Delbono & Luca Lambertini, 2022. "Optimal emission taxation and the Porter hypothesis under Bertrand competition," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 755-765, September.
    3. Luca Lambertini & Giuseppe Pignataro & Alessandro Tampieri, 2022. "Competition among coalitions in a cournot industry: a validation of the porter hypothesis," The Japanese Economic Review, Springer, vol. 73(4), pages 679-713, October.
    4. Feichtinger, Gustav & Lambertini, Luca & Leitmann, George & Wrzaczek, Stefan, 2022. "Managing the tragedy of commons and polluting emissions: A unified view," European Journal of Operational Research, Elsevier, vol. 303(1), pages 487-499.
    5. Jihad C. Elnaboulsi, 2015. "Environmental Regulation and Policy Design: The Impact of the Regulator?s Ecological Conscience on the Tax Setting Process," Working Papers 2015-11, CRESE.
    6. Kaz Miyagiwa, 2009. "Collusion And Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 768-784, December.
    7. Fu, Ke & Li, Yanzhi & Mao, Huiqiang & Miao, Zhaowei, 2023. "Firms’ production and green technology strategies: The role of emission asymmetry and carbon taxes," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1100-1112.
    8. Lahiri, Sajal & Ono, Yoshiyasu, 2015. "Pollution, foreign direct investment, and welfare," Research in Economics, Elsevier, vol. 69(2), pages 238-247.
    9. Elettra Agliardi & Luca Lambertini, 2024. "To Abate, or Not to Abate? The Arising of the Win–Win Solution Under Time Consistent Emission Taxation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(6), pages 1389-1405, June.
    10. Eric Giraud-Héraud & Jean-Pierre Ponssard & Bernard Sinclair Desgagné & Louis-Georges Soler, 2016. "The agro-food industry, public health, and environmental protection: investigating the Porter hypothesis in food regulation," Review of Agricultural, Food and Environmental Studies, Springer, vol. 97(2), pages 127-140, September.
    11. Daniel Nachtigall, 2019. "Dynamic Climate Policy Under Firm Relocation: The Implications of Phasing Out Free Allowances," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 473-503, September.
    12. Kurtyka, Oliwia & Mahenc, Philippe, 2011. "The switching effect of environmental taxation within Bertrand differentiated duopoly," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 267-277, September.
    13. Dragone, Davide & Lambertini, Luca & Palestini, Arsen, 2022. "Emission taxation, green innovations and inverted-U aggregate R&D efforts in a linear state differential game," Research in Economics, Elsevier, vol. 76(1), pages 62-68.
    14. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    15. Lassi Ahlvik & Matti Liski, 2019. "Think global, act local! A mechanism for global commons and mobile firms," CESifo Working Paper Series 7597, CESifo.
    16. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.
    17. Antelo, Manel & Loureiro, Maria L., 2009. "Asymmetric information, signaling and environmental taxes in oligopoly," Ecological Economics, Elsevier, vol. 68(5), pages 1430-1440, March.
    18. Yasunori Ouchida & Daisaku Goto, 2022. "Strategic non‐use of the government's precommitment ability for emissions taxation: Environmental R&D formation in a Cournot duopoly," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 181-206, March.
    19. André, Francisco J., 2015. "Strategic Effects and the Porter Hypothesis," MPRA Paper 62237, University Library of Munich, Germany.
    20. 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.

    More about this item

    Keywords

    Implicit collusion; Win–win solution; Relocation; Green technology; Emission taxation; Environmental standard;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

    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:kap:enreec:v:78:y:2021:i:1:d:10.1007_s10640-020-00533-x. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.