Tradable Permits vs Ecological Dumping

Panos Hatzipanayotou, Fabio Antoniou and Phoebe Koundouri ()

No 2010.2, Working Papers from Fondazione Eni Enrico Mattei

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: Strategic Environmental Policy; Tradable Permits; Race to the top (search for similar items in EconPapers)
JEL-codes: F12 F18 Q58 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://feem-media.s3.eu-central-1.amazonaws.com/w ... oads/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)
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:fem:femwpa:2010.2

Access Statistics for this paper

More papers in Working Papers from Fondazione Eni Enrico Mattei Contact information at EDIRC.
Bibliographic data for series maintained by Alberto Prina Cerai ( this e-mail address is bad, please contact ).