Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268636 
Year of Publication: 
2023
Series/Report no.: 
GLO Discussion Paper No. 1240
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
In a three-country model in which export countries adopt environmental policies, this note analyses how abatement ("green") subsidy can become a potential strategic trade policy tool. When governments set the optimal policy tool considering their local environmental damages, a rich set of equilibria arise. In contrast to the standard result, it is shown that subsidising pollution abatement can 1) emerge as a Pareto-efficient equilibrium of the game; and 2) be the only feasible environmental policy when environmental awareness is low, irrespective of the technological efficiency. Therefore, "green" subsidies can lead to a win-win situation.
Subjects: 
Abatement subsidy
Exports
International duopoly
JEL: 
H23
F13
L13
Document Type: 
Working Paper

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