Policy spillovers in the regulation of multiple pollutants

Stefan Ambec and Jessica Coria

Journal of Environmental Economics and Management, 2018, vol. 87, issue C, 114-134

Abstract: We analyze the interplay between policies aimed to control transboundary and local pollutants such as greenhouse gases and particulate matter. The two types of pollution interact in the abatement cost function of the polluting firms through economies or diseconomies of scope. They are regulated by distinct entities, potentially with different instruments that are designed according to some specific agenda. We show that the choice of regulatory instrument and the timing of the regulations matter for efficiency. Emissions of the local pollutant are distorted if the regulators anticipate that transboundary pollution will later be regulated through emission caps. The regulation is too stringent with diseconomies of scope, and not enough with economies of scope. In contrast, we obtain efficiency if the transboundary pollutant is regulated by emission taxes or tradable emission permits provided that the revenue from taxing emissions are redistributed to the countries in a lump-sum way and that the initial allocation of tradable emission permits is not linked to abatement costs.

Keywords: Environmental regulation; Transboundary pollution; Multiple-pollutants; Co-benefits; Ancillary benefits; Emission tax; Emission standard; Tradable emissions permits (search for similar items in EconPapers)
JEL-codes: D62 H23 Q50 Q53 Q54 Q58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:87:y:2018:i:c:p:114-134

DOI: 10.1016/j.jeem.2017.05.011

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