Tradable Permits vs Ecological Dumping

Fabio Antoniou, Panos Hatzipanayotou and Phoebe Koundouri ()

No 59374, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: In this paper we examine an alternative policy scenario, where governments allow polluting firms to trade permits in a strategic environmental policy model. We demonstrate, among other things, that with no market power in the permits market, governments of the exporting firms do not have an incentive to under-regulate pollution in order to become more competitive. This strategic effect is reversed and leads to a welfare level closer to the cooperative one and strictly higher to that when permits are non-tradable. Allowing for market power in the permits market, the incentive to under-regulate pollution re-appears regardless of whether permits are tradable or not. With tradable permits, however, the incentive to under-regulate pollution is comparatively weaker relative to the case of non-tradable permits. This entails potential benefits for the exporting firms and countries since the prisoners’ dilemma is moderated.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 31
Date: 2010-01
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Citations: View citations in EconPapers (1)

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https://ageconsearch.umn.edu/record/59374/files/NDL2010-002.pdf (application/pdf)

Related works:
Working Paper: Tradable Permits vs Ecological Dumping (2010)
Working Paper: Tradable Permits vs Ecological Dumping (2010)
Working Paper: Tradable Permits vs Ecological Dumping (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:59374

DOI: 10.22004/ag.econ.59374

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