 Tradable Permits vs Ecological DumpingPhoebe Koundouri (), Fabio Antoniou and Panos Hatzipanayotou No 1002, DEOS Working Papers from Athens University of Economics and Business Abstract: In this paper we examine an alternative policy scenario, where governments allow polluting Ã??rms 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 Ã??rms and countries since the prisonersÃ??dilemma is moderated. Keywords: Strategic environmental policy; Tradable permits; Race to the top (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aue:wpaper:1002 Access Statistics for this paper More papers in DEOS Working Papers from Athens University of Economics and Business Contact information at EDIRC. |
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