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On The Strategic Effect of International Permits Trading on Local Pollution: The Case of Multiple Pollutants

Author

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  • Antoniou, Fabio

    (Institut für Wirtschaftstheorie I, Humboldt-Univeristät zu Berlin)

  • Kyriakopoulou, Efthymia

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

We introduce a model of strategic environmental policy where two firms compete à la Cournot in a third market under the presence of multiple pollutants. Two types of pollutants are introduced, a local and a transboundary one. The regulator can only control local pollution as transboundary pollution is regulated internationally. The strategic effect present in the original literature is also replicated in this setup. However, we illustrate that when transboundary pollution is regulated through the use of tradable emission permits instead of non-tradable ones then a new strategic effect appears which had not been identified thus far. In this case, local pollution increases further and welfare is lowered. We also provide evidence from the implementation of EU ETS over the pollution of PM10 and PM2.5.

Suggested Citation

  • 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.
    • Handle: RePEc:hhs:gunwpe:0610
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    File URL: https://gupea.ub.gu.se/handle/2077/38156
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    References listed on IDEAS

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    Cited by:

    1. Ambec, Stefan & Coria, Jessica, 2015. "Strategic environmental regulation of multiple pollutants," Working Papers in Economics 626, University of Gothenburg, Department of Economics.
    2. Ambec, Stefan & Coria, Jessica, 2018. "Policy spillovers in the regulation of multiple pollutants," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 114-134.

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    More about this item

    Keywords

    Environmental regulation; multiple pollutants; (non) tradable permits; strategic interactions;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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