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Abolishing Environmental Regulation: Strategic E§ects and Welfare Implications

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This paper considers an environmental policy that may be rolled back in future periods by anew administration. We examine how this policy uncertainty reduces firms' incentives to invest in green R&D before the policy is scheduled to come into e§ect, increasing as a result polluting emissions. We then evaluate the welfare loss generated by policy uncertainty and compare it against the welfare loss due to abolishing environmental regulation. We identify industries where policy uncertainty can yield larger welfare losses than those from an unregulated externality. We also Önd under which settings Örm proÖts are larger when environmental policy is likely to remain into e§ect than rolled back.

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  • Espinola-Arredondo, Ana & Munoz-Garcia, Felix, 2021. "Abolishing Environmental Regulation: Strategic E§ects and Welfare Implications," Working Papers 2018-7, School of Economic Sciences, Washington State University.
    • Handle: RePEc:ris:wsuwpa:2018_007
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    More about this item

    Keywords

    Environmental policy; Rolled back regulation; Green R&D investment; Welfarelosses; Policy uncertainty;
    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
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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