Strategic environmental policy under free trade with transboundary pollution

Harvey Lapan and Shiva Sikdar

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: We analyze the effects of trade liberalization on environmental policies in a strategic setting when there is transboundary pollution.Trade liberalization can result in a race to the bottom in environmental taxes, which makes both countries worse off. This is not due to the terms of trade motive, but rather the incentive, in a strategic setting, to reduce the incidence of transboundary pollution. With command and control policies (emission quotas), countries are unable to influence foreign emissions by strategic choice of domestic policy; hence, there is no race to the bottom. However, with internationally tradable quotas, unless pollution is a pure global public bad, there is a race to the bottom in environmental policy. Under free trade, internationally nontradable quotas result in the lowest pollution level and strictly welfare-dominate taxes. The ordering of internationally tradable quotas and pollution taxes depends, among other things, on the degree of international pollution spillovers

Date: 2011-01-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... 257db87b4cc8/content

Related works:
Journal Article: Strategic Environmental Policy under Free Trade with Transboundary Pollution (2011)
Working Paper: Strategic environmental policy under free trade with transboundary pollution (2010)
Working Paper: Strategic Environmental Policy Under Free Trade with Transboundary Pollution (2008)
Working Paper: Strategic Environmental Policy Under Free Trade with Transboundary Pollution (2007)
Working Paper: Strategic environmental policy under free trade with transboundary pollution (2007)
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:isu:genstf:201101010800001168

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().