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Ambitious Emissions Goal as a Strategic Preemption

Hiroaki Yamagami (), Ryo Arawatari and Takeo Hori ()
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Hiroaki Yamagami: Seikei University
Takeo Hori: Tokyo Institute of Technology

No 2019.13, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We model a political game where a policymaker pledges a domestic emissions goal in the context of instrument choice between carbon pricing (CP) and a quota approach. We show that, although the policymaker faces an emissions goal proposed from an international environmental agreement, she may pledge a more stringent emissions than the proposed level. We define this stringent goal as an “ambitious emissions goal". We show that the ambitious emissions goal acts as a strategy for the policymaker that preempts the industry's lobby in a subsequent stage. We also suppose that, if CP is introduced, a rent-seeking contest for the CP revenue refund is held. Then, if the contest is socially costly enough, CP is no longer an optimal instrument. Finally, we extend the model of one country to that of two symmetric countries. A Nash equilibrium where both countries pledge the ambitious emissions goals remains.

Keywords: Lobby; Carbon pricing; Voluntary approach; Revenue refund; Rent-seeking (search for similar items in EconPapers)
JEL-codes: D72 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-gth
Date: 2019-09
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