Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/217020 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8269
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
I examine a policy-making game among countries that must choose both a policy instrument (e.g., a tax or a quota) and its intensity (i.e., the tax rate or the quota level) to price pollution. When countries price pollution non-cooperatively, they not only set the intensity inefficiently, they are also likely to adopt Pigouvian fees, despite quotas being better from a welfare perspective. Adopting a Pigouvian fee to address a multi-country externality generates a risk externality, and non-cooperatively chosen quotas can generate higher social welfare than maximum social welfare Pigouvian fees can deliver.
Subjects: 
environmental policy
global pollution
international relations
JEL: 
C72
D81
F50
H21
Q38
Q58
Document Type: 
Working Paper
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