Second Best Environmental Policies under Uncertainty

Fabio Antoniou, Panos Hatzipanayotou and Phoebe Koundouri ()

Southern Economic Journal, 2012, vol. 78, issue 3, 1019-1040

Abstract: We construct a strategic environmental policy model of an international duopoly. Governments use environmental policies, such as an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to firms, however, governments are unable to perfectly foresee the actual level of demand and the cost of abatement. Our results suggest that not only the presence but also the absolute level of uncertainty matters for the optimal choice of the environmental policy instrument. Moreover, the optimality conditions under strategic behavior may lead to welfare losses relative to the cooperative outcomes because of under‐regulation and lack of policy coordination between the two countries.

Date: 2012
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Citations: View citations in EconPapers (3)

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https://doi.org/10.4284/0038-4038-78.3.1019

Related works:
Working Paper: Second Best Environmental Policies under Uncertainty (2010)
Working Paper: Second Best Environemntal Policies Under Uncertainty (2010)
Working Paper: Second Best Environmental Policies under Uncertainty (2010)
Working Paper: Second Best Environmental Policies under Uncertainty (2010)
Working Paper: Second Best Environmental Policies under Uncertainty (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:78:y:2012:i:3:p:1019-1040

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