Working Paper : 1002


Authors Antoniou, F., Hatzipanayotou, P. and Koundouri, P.
Title Tradable Permits vs Ecological Dumping
Abstract In this paper we examine an alternative policy scenario, where governments allow polluting Ã??rms 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 Ã??rms and countries since the prisonersÃ??dilemma is moderated.
Lenght (pages) 28
Creation Date 2009-02-01
Keywords Strategic environmental policy, Tradable permits, Race to the top
Classification JEL Q58, F12, F18
File Antoniou.pdf (221676 bytes)
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