Discriminatory Environmental Taxes and the Porter Hypothesis

Yoshihiro Hamaguchi ()
Additional contact information
Yoshihiro Hamaguchi: Hannan University

Chapter Chapter 15 in Sustainable Development in Economic Growth Theory, 2025, pp 211-230 from Springer

Abstract: Abstract In R&D-based heterogeneous firms, pollution emissions and a discriminatory environmental tax are introduced. The environmental tax affects firms’ entry and exit. Trade environment policies affect total pollution emissions through scale, composition and reallocation effects. Increasing taxes on local firms has a non-monotonic effect on average productivity and pollution emissions due to firms exiting the local market and entering the export market. Increasing taxes on export firms has a non-monotonic effect due to firms entering the local market and exiting the export market. In a border tax adjustment (BTA) effect, where the tax rate for local firms is higher than for export firms, welfare improves due to a tax increase for local firms and deteriorates due to a tax increase for export firms. Due to the cleaning effect of trade liberalisation, the average productivity improves. However, due to the positive composition effect, trade liberalisation increases pollution. In the pollution haven effect, due to the negative reallocation effect, trade liberalisation reduces pollution. Therefore, trade liberalisation has a non-monotonic welfare effect. Regarding a uniform environmental tax, trade liberalisation has no effect on pollution emissions and a positive welfare effect. Based on these results, the relationship with the Porter hypothesis is explained.

Keywords: Discriminatory environmental tax; Border tax adjustment; Pollution haven effect; Reallocation effect; Porter hypothesis (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-96-7639-2_15

Ordering information: This item can be ordered from
http://www.springer.com/9789819676392

DOI: 10.1007/978-981-96-7639-2_15

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().