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International Coordination of Environmental Policies:Is it Always Worth the Effort?

Jude Bayham, Ana Espinola-Arredondo and Felix Munoz-Garcia ()
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Felix Munoz-Garcia: School of Economic Sciences, Washington State University

Authors registered in the RePEc Author Service: Sherzod B. Akhundjanov

No 2014-3, Working Papers from School of Economic Sciences, Washington State University

Abstract: We study the use of entry subsidies as an alternative form of environmental policy. Given the strong political opposition to standard output subsidies, several countries have recently used entry policies to promote renewable energy technology, such as solar panels and biofuels. We study a two-stage game in which two regulators choose an entry policy (i.e., tax, subsidy, or permit) to maximize domestic welfare. Observing the policy, firms decide the region in which to enter and compete as Cournot oligopolists. We nd that both chosen domestic (uncoordinated) policies and internationally coordinated policies increase welfare. However, the welfare gains from international policy coordination are only large when the product is extremely clean. These results indicate that the welfare gains of international policy coordination may only o set the costs of negotiation in relatively clean industries.

Keywords: Experiments; Entry subsidy, Strategic environmental policy, Policy coordination, Imperfect competition (search for similar items in EconPapers)
JEL-codes: F12 H23 H73 Q56 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-08
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Downloads: (external link) First version, 2014 (application/pdf)

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