Skip to main content Accessibility help
×
×
Home

International coordination of environmental policies: is it always worth the effort?

  • Jude Bayham (a1), Félix Muñoz-García (a2) and Ana Espínola-Arredondo (a2)
Abstract

We study entry policies as an alternative form of environmental policy. Given the strong political opposition to standard output subsidies and taxes, 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 find that both domestic (uncoordinated) policies and internationally coordinated policies increase welfare relative to unregulated settings. 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 offset the costs of negotiation in relatively clean industries.

Copyright
Corresponding author
*Corresponding author. Email: anaespinola@wsu.edu
References
Hide All
Barrett, S (1994) Strategic environmental policy and international trade. Journal of Public Economics 54(3), 325338.
Bayındır-Upmann, T (2003) Strategic environmental policy under free entry of firms. Review of International Economics 11(2), 379396.
Bhattacharjea, A (2002) Foreign entry and domestic welfare: Lessons for developing countries. Journal of International Trade & Economic Development 11(2), 143162.
Brander, JA and Spencer, BJ (1981) Tariffs and the extraction of foreign monopoly rents under potential entry. Canadian Journal of Economics 14(3), 371389.
Brander, JA and Spencer, BJ (1985) Export subsidies and international market share rivalry. Journal of International Economics 18(1), 83100.
Castelazo, M (2012) China's solar industry and the u.s. anti-dumping/anti-subsidy trade case. The Kearny Alliance Project.
Cherry, TL, Kallbekken, S and Kroll, S (2014) The impact of trial runs on the acceptability of environmental taxes: Experimental evidence. Resource and Energy Economics 38(3), 8495.
Conrad, K and Wang, J (1993) On the design of incentive mechanisms in environmental policy. Environmental and Resource Economics 3(3), 245262.
Dolan, SL and Heath, GA (2012) Life cycle greenhouse gas emissions of utility-scale wind power. Journal of Industrial Ecology 16), S136S154.
Duval, Y and Hamilton, SF (2002) Strategic environmental policy and international trade in asymmetric oligopoly markets. International Tax and Public Finance 9(3), 259271.
Eaton, J and Grossman, GM (1986) Optimal trade and industrial policy under oligopoly. The Quarterly Journal of Economics 101(2), 383406.
Ederington, J. and Minier, J (2003) Is environmental policy a secondary trade barrier? An empirical analysis. Canadian Journal of Economics 36(1), 137154.
Etro, F (2011) Endogenous market structures and strategic trade policies. International Economic Review 52(1), 6384.
Fujiwara, K (2009) Environmental policies in a differentiated oligopoly revisited. Resource and Energy Economics 31(3), 239247.
Greaker, M (2003) Strategic environmental policy; eco-dumping or a green strategy? Journal of Environmental Economics and Management 45(3), 692707.
Hart, M (2012) Shining a light on U.S.-China clean energy cooperation. The Center for American Progress.
Haufler, A and Wooton, I (2010) Competition for firms in an oligopolistic industry: The impact of economic integration. Journal of International Economics 80(2), 239248.
Hovi, J, Ward, H and Grundig, F (2014) Hope or despair? Formal models of climate cooperation. Environmental and Resource Economics 62(4), 124.
Hsu, DD et al. (2012) Life cycle greenhouse gas emissions of crystalline silicon photovoltaic electricity generation. Journal of Industrial Ecology 16, S122S135.
IEA Trends 2013 in photovoltaic applications: Survey report of selected IEA countries between 1992 and 2012. IEA-PVPS T1-23:2013. International Energy Agency.
Janeba, E (1998) Tax competition in imperfectly competitive markets. Journal of International Economics 44(1), 135153.
Katsoulacos, Y and Xepapadeas, A (1995) Environmental policy under oligopoly with endogenous market structure. The Scandinavian Journal of Economics 97(3), 411420.
Kayalica, and Lahiri, S (2005) Strategic environmental policies in the presence of foreign direct investment. Environmental and Resource Economics 30(1), 121.
Kennedy, PW (1994) Equilibrium pollution taxes in open economies with imperfect competition. Journal of Environmental Economics and Management 27(1), 4963.
Lahiri, S and Symeonidis, G (2007) Piecemeal multilateral environmental policy reforms under asymmetric oligopoly. Journal of Public Economic Theory 9(5), 885899.
Liska, AJ et al. (2009) Improvements in life cycle energy efficiency and greenhouse gas emissions of corn-ethanol. Journal of Industrial Ecology 13(1), 5874.
Mankiw, NG and Whinston, MD (1986) Free entry and social inefficiency. The RAND Journal of Economics 17(1), 4858.
Markusen, JR, Morey, ER and Olewiler, N (1995) Competition in regional environmental policies when plant locations are endogenous. Journal of Public Economics 56(1), 5577.
Mason, CF, Barbier, EB and Umanskaya, VI (2014) On the strategic use of border tax adjustments as a second-best climate policy measure. Environment and Development Economics 24(4), 122.
Reitzes, JD and Grawe, OR (1999) Entry policy and entry subsidies. Review of International Economics 7(4), 715731.
Ruffin, RJ (1971) Cournot oligopoly and competitive behaviour. The Review of Economic Studies 38(4), 493502.
Simmons, ZS (2014) Subsidizing solar: The case for an environmental goods and services carve-out from the global subsidies regime. UCLA Journal of Environmental Law and Policy 32(2), 422484.
Spencer, BJ and Brander, JA (1983) International R&D rivalry and industrial strategy. The Review of Economic Studies 50(4), 707722.
Stähler, F and Upmann, T (2008) Market entry regulation and international competition. Review of International Economics 16(4), 611626.
Stokes, LC (2013) The politics of renewable energy policies: The case of feed-in tariffs in ontario, canada. Energy Policy 56, 490500.
Tracey, DK (2012) The missing lending link: Why a federal loan guarantee program is critical to the continued growth of the solar power industry. North Carolina Banking Institute 16, 349374.
Ulph, A (1996) Environmental policy and international trade when governments and producers act strategically. Journal of Environmental Economics and Management 30(3), 265281.
Vives, X (2001) Oligopoly Pricing: Old Ideas and New Tools. Cambridge, Massachusetts: MIT Press.
Whalley, J (1991) The interface between environmental and trade policies. The Economic Journal 101(405), 180189.
Wilson, JD (1999) Theories of tax competition. National Tax Journal 52(2), 269304.
Zodrow, GR and Mieszkowski, P (1986) Pigou, tiebout, property taxation, and the underprovision of local public goods. Journal of Urban Economics 19(3), 356370.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

JEL classification

Type Description Title
PDF
Supplementary materials

Bayham et al. supplementary material
Online Appendix

 PDF (475 KB)
475 KB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed