Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43491
Authors: 
Antoniou, Fabio
Hatzipanayotou, Panos
Koundouri, Phoebe
Year of Publication: 
2010
Series/Report no.: 
Nota di lavoro // Fondazione Eni Enrico Mattei: Sustainable Development 2010,2
Abstract: 
In this paper we examine an alternative policy scenario, where governments allow polluting firms to trade permits in a strategic environmental policy model. We demonstrate, among other things, that with no market power in the permits market, governments of the exporting firms do not have an incentive to under-regulate pollution in order to become more competitive. This strategic effect is reversed and leads to a welfare level closer to the cooperative one and strictly higher to that when permits are non-tradable. Allowing for market power in the permits market, the incentive to under-regulate pollution re-appears regardless of whether permits are tradable or not. With tradable permits, however, the incentive to under-regulate pollution is comparatively weaker relative to the case of non-tradable permits. This entails potential benefits for the exporting firms and countries since the prisoners' dilemma is moderated.
Subjects: 
Strategic Environmental Policy
Tradable Permits
Race to the top
JEL: 
Q58
F12
F18
Document Type: 
Working Paper

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