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Reforms of Environmental Policies in the Presence of Cross-border Pollution and two Stage Clean Up

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  • Panos Hatzipanayotou
  • Sajal Lahiri
  • Michael S. Michael

Abstract

We construct a two-country model where pollution from production is transmitted across borders. Pollution abatement is undertaken sequentially by private producers and the public sector. We characterize the Nash optimal levels of the policy instruments in the two countries: emission taxes and funds allocated for public abatement activities. We examine the implications of a number of multilateral policy reforms. One of our findings is that the magnitude of the beneficial effect of a reform depends on the scope of the reform, and if it is restricted to a subset of policy instruments, then the efficacy of environmental policy reform can be greatly undermined.

Suggested Citation

  • Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2002. "Reforms of Environmental Policies in the Presence of Cross-border Pollution and two Stage Clean Up," University of Cyprus Working Papers in Economics 0203, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:0203
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    Cross-border pollution; Private pollution abatement; Public pollution abatement; multilateral policy reform.;
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