Porter Hypothesis vs Pollution Haven Hypothesis: Can There Be Environmental Policies Getting Two Eggs in One Basket?

Claudia Ranocchia () and Luca Lambertini ()
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Claudia Ranocchia: University of Bologna

Environmental & Resource Economics, 2021, vol. 78, issue 1, No 6, 177-199

Abstract: Abstract The Porter hypothesis and the pollution haven hypothesis seem to predict opposite reactions by firms facing environmental regulation, as the first invokes the arising of a win–win solution while the second envisages the possibility for firms to flee abroad. We illustrate the possibility of designing policies (taking the form of either emission taxation or environmental standards) able to eliminate firms’ incentives to relocate their plants abroad and create a parallel incentive for them to deliver a win–win solution by investing either in replacement technologies under emission taxation, or in abatement technologies under an environmental standard. This is worked out in a Cournot supergame in which firms may activate the highest level of collusion compatible with their intertemporal preferences.

Keywords: Implicit collusion; Win–win solution; Relocation; Green technology; Emission taxation; Environmental standard (search for similar items in EconPapers)
JEL-codes: L13 L51 Q50 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (15)

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DOI: 10.1007/s10640-020-00533-x

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