Increasing worldwide environmental consciousness and environmental policy adjustment
Kuang-Chung Hsu and
Bih Jane Liu
The Quarterly Review of Economics and Finance, 2019, vol. 71, issue C, 205-210
Increasing worldwide environmental consciousness has been driving countries in the world to adjust their environmental policies. Conventional wisdom often suggests tightening environmental policy, but this paper challenges that wisdom. By using an oligopoly model, we show that, in the case of local pollution, a country that confronts increasing environmental consciousness tightens or slackens its environmental policy depending on the relative cost competitiveness to its rivals. However, in the case of global pollution, all countries in the world always tighten their environmental policies as worldwide environmental consciousness rises. These results derived from the optimal non-cooperative (Nash) equilibrium policy that maximizes own country’s welfare are valid in the case of efficient policy setting in which policy is chosen to maximize global welfare. The policy gap between these two equilibria may increase or decrease as environmental consciousness changes, relying on the relative competitiveness to firm’s rivals and on the initial level of environmental consciousness.
Keywords: Environmental consciousness; Nash equilibrium policy; Efficient policy; Policy gap; Environmental policy adjustment (search for similar items in EconPapers)
JEL-codes: F18 Q58 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:71:y:2019:i:c:p:205-210
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