Strategic Environmental Policy and the Mobility of Firms

Philipp Richter (), Marco Runkel () and Robert Schmidt

No 1801, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The loss of international competitiveness of domestic industries remains a key obstacle to the implementation of effective carbon prices in a world without harmonized climate policies. We analyze countries' non-cooperative choices of emissions taxes under imperfect competition and mobile polluting firms. In our general equilibrium setup with trade, wage effects prevent all firms from locating in the same country. While under local or no pollution countries achieve the first-best, under transboundary pollution taxes are inefficiently low and lower than under autarky where only the `standard' free-riding incentive distorts emissions taxes. This effect is more pronounced when polluting firms are mobile.

Keywords: Strategic environmental policy; firm location; carbon leakage; general equilibrium (search for similar items in EconPapers)
JEL-codes: F12 F18 H23 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2019
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Strategic Environmental Policy and the Mobility of Firms (2021)
Working Paper: Strategic environmental policy and the mobility of firms (2019)
Working Paper: Strategic environmental policy and the mobility of firms (2019)
Working Paper: Strategic environmental policy and the mobility of firms (2019)
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