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Tradable permits vs ecological dumping when governments act non-cooperatively

Author

Listed:
  • Fabio Antoniou
  • Panos Hatzipanayotou
  • Phoebe Koundouri

Abstract

In this paper we incorporate tradable permits in a model of strategic environmental policy as an alternative policy scheme. In particular, we develop an international oligopoly model, where governments issue non-cooperatively a number of permits and then allow their trading by their polluting firms. Permits trading is a dominant strategy and it ensures that welfare is strictly higher than in a situation where permits are non-tradable. When the permits market is efficient, exporting countries have an incentive to tighten regulation in order to enhance their firms' competitiveness. Allowing for market power in the permits market, the incentive to relax regulation may re-appear, yet it is comparatively weaker relative to the case of non-tradable permits. The benefits of this policy scheme disappear if the governments along with emission permits adopt an emissions subsidy. Copyright 2014 Oxford University Press 2012 All rights reserved, Oxford University Press.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2014. "Tradable permits vs ecological dumping when governments act non-cooperatively," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 188-208, January.
    • Handle: RePEc:oup:oxecpp:v:66:y:2014:i:1:p:188-208
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    File URL: http://hdl.handle.net/10.1093/oep/gps046
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    Cited by:

    1. Doda, Baran & Quemin, Simon & Taschini, Luca, 2019. "Linking permit markets multilaterally," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    2. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2024. "Regulatory Stringency and Emission Leakage Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(6), pages 1407-1424, June.
    3. Athanasios Lapatinas & Anastasia Litina & Eftichios Sophocles Sartzetakis, 2019. "Environmental projects in the presence of corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 103-144, February.
    4. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2017. "Welfare Ranking of Environmental Policies in the Presence of Capital Mobility and Cross‐Border Pollution," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 317-336, July.
    5. Harvey E. Lapan & Shiva Sikdar, 2017. "Can Trade Be Good for the Environment?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 267-288, April.
    6. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2015. "Emission Permits and Public Pollution Abatement:: Can Decentralized Environmental Policies be Efficient?," CESifo Working Paper Series 5278, CESifo.
    7. 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.
    8. Harvey E. Lapan & Shiva Sikdar, 2019. "Is Trade in Permits Good for the Environment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(2), pages 501-510, February.
    9. Cheng, Haitao, 2024. "Domestic versus international emissions trading with capital mobility," Resource and Energy Economics, Elsevier, vol. 77(C).
    10. repec:aue:wpaper:1509 is not listed on IDEAS
    11. Alvarez, Francisco & André, Francisco J., 2015. "Auctioning emission permits in a leader-follower setting," MPRA Paper 61698, University Library of Munich, Germany.
    12. Yasunori Ishii, 2017. "Dumping in a product differentiated reciprocal trade industry emitting global pollution," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(2), pages 195-208, February.
    13. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.
    14. Shiva Sikdar, 2023. "Trade, Transport Emissions and Multimarket Collusion with Border Adjustments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(3), pages 407-432, November.
    15. 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.

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