Equilibrium pollution taxes in a two industry open economy

This paper involves strategic implications of environmental policy in case of two international oligopolies when countries take part in an international environmental agreement and have agreed on national target levels for a global pollutant. This set-up permits an analysis of the design of optimal...

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Bibliographic Details
Published in:European economic review 2001-03, Vol.45 (3), p.519-532
Main Author: Nannerup, Niels
Format: Article
Language:English
Subjects:
Economic theory
Emissions trading
Environmental policy
Environmental tax
Equilibrium
Europe
Industry cost differences
International
International trade
Mathematical economics
National emission targets
Oligopoly
Open economies
Pollutants
Pollution
Strategic policy design
Taxation
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Summary:This paper involves strategic implications of environmental policy in case of two international oligopolies when countries take part in an international environmental agreement and have agreed on national target levels for a global pollutant. This set-up permits an analysis of the design of optimal emission taxes across domestic producers. By differentiating taxes between industries with different abatement cost, demand, and number of domestic firms, governments are in a position to raise national net foreign rents. It is argued that a single national emission trading programme encompassing all domestic producers cannot provide the equivalent strategic policy design.
ISSN:0014-2921
1873-572X
DOI:10.1016/S0014-2921(99)00028-8