Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167547
Authors: 
Mason, Charles F.
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6561
Abstract: 
I investigate the interaction between a country that imports a commodity whose production contributes to a stock pollution, such as electricity, from a country that produces that commodity. If the transboundary externality is priced improperly, the application of a feed-in tariff or border tax adjustment can provide an indirect policy instrument. But the imposition of such a tariff or tax creates an incentive for the producing country to deploy some sort of pollution controlling instrument. This, in turn, creates a strategic interaction between the two countries. Because the externality is inked to a stock pollutant, this strategic interaction will play out over time, which induces a dynamic game. In this modeling context, I describe the nature of the strategic interaction, and characterize the Markov-perfect equilibrium.
Subjects: 
transboundary pollution
differential game
tariff
tax
JEL: 
C73
Q54
Q58
Document Type: 
Working Paper

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