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Strategic environmental policy and international market share rivalry under differentiated Bertrand oligopoly
[Tradable permits vs. ecological dumping when governments act non-cooperatively]

Author

Listed:
  • Harvey E Lapan
  • Shiva Sikdar

Abstract

We analyse strategic environmental policies under international Bertrand oligopoly when firms in different industries, located in different countries, produce differentiated products. Under cooperation, emission prices always exceed the joint marginal damage from pollution. Under non-cooperation, internationally nontradable and tradable emission permit prices are always higher than the domestic marginal damage from emissions (the Pigovian tax); emission taxes can also exceed the Pigovian tax. The non-cooperative emission prices under all instruments can exceed the joint pollution damage. Internationally tradable permits generate outcomes closest to cooperation — they result in the lowest pollution and the highest welfare among all instruments under non-cooperation. Pollution is the highest and welfare the lowest with taxes. Our results provide support for allowing international trade in emission permits even when governments choose their permit levels non-cooperatively.

Suggested Citation

  • Harvey E Lapan & Shiva Sikdar, 2022. "Strategic environmental policy and international market share rivalry under differentiated Bertrand oligopoly [Tradable permits vs. ecological dumping when governments act non-cooperatively]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 215-235.
    • Handle: RePEc:oup:oxecpp:v:74:y:2022:i:1:p:215-235.
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    File URL: http://hdl.handle.net/10.1093/oep/gpaa035
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    Cited by:

    1. Daniel May & Ourania Tremma, 2023. "Effects of Sustainable Regulations at Agricultural International Market Failures: A Dynamic Approach," Sustainability, MDPI, vol. 15(3), pages 1-10, January.
    2. Lai, Yu-Bong, 2024. "International emissions trading and the distribution of capital," Resource and Energy Economics, Elsevier, vol. 78(C).
    3. 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.
    4. Ying Li & Wing-Keung Wong & Ming Jing Yang & Yang-Che Wu & Tien-Trung Nguyen, 2022. "Modeling the Linkage between Vertical Contracts and Strategic Environmental Policy: Energy Price Marketization Level and Strategic Choice for China," Energies, MDPI, vol. 15(13), pages 1-12, June.

    More about this item

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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