Environmental Policy in an Open Economy

Politique environnementale en économie ouverte

Marie-Françoise Calmette
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Marie-Françoise Calmette: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We examine the design of national emission taxes in an international trade setting with imperfect competition and trade costs. The main point of the paper is that there can exist a consistency problem with respect to tax policy in a setting where trade costs are positive. In particular, when firms make production decisions in response to tax policy, there exists a range of trade costs such that the optimal tax for a given trading outcome (autarky or trade) does not induce that trading outcome in equilibrium. This range is wider as the markets are less competitive. We also show that environmental taxes are higher when markets are open, nevertheless, at positive trade costs, social welfare is lower than in autarky.

Date: 2008-07
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Published in Revue Economique, 2008, 59 (3), pp.517-526. ⟨10.3917/reco.593.0517⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04411278

DOI: 10.3917/reco.593.0517

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