Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-10T15:30:30.413Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  11 March 2019

Jude Bayham ,
Félix Muñoz-García  and
Ana Espínola-Arredondo
Jude Bayham
Affiliation:
Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, Colorado, USA
Félix Muñoz-García
Affiliation:
School of Economic Sciences, Washington State University, Pullman, Washington, USA
Ana Espínola-Arredondo*
Affiliation:
School of Economic Sciences, Washington State University, Pullman, Washington, USA
*
*Corresponding author. Email: anaespinola@wsu.edu
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

entry subsidystrategic environmental policypolicy coordinationimperfect competition

JEL classification

Q56: Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth H73: Interjurisdictional Differentials and Their Effects F12: Models of Trade with Imperfect Competition and Scale Economies • Fragmentation H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies
Type
Research Article
Information
Environment and Development Economics , Volume 24 , Issue 3 , June 2019 , pp. 294 - 316
Copyright
Copyright © Cambridge University Press 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Barrett, S (1994) Strategic environmental policy and international trade. Journal of Public Economics 54(3), 325–338.Google Scholar
Bayındır-Upmann, T (2003) Strategic environmental policy under free entry of firms. Review of International Economics 11(2), 379–396.Google Scholar
Bhattacharjea, A (2002) Foreign entry and domestic welfare: Lessons for developing countries. Journal of International Trade & Economic Development 11(2), 143–162.Google Scholar
Brander, JA and Spencer, BJ (1981) Tariffs and the extraction of foreign monopoly rents under potential entry. Canadian Journal of Economics 14(3), 371–389.Google Scholar
Brander, JA and Spencer, BJ (1985) Export subsidies and international market share rivalry. Journal of International Economics 18(1), 83–100.Google Scholar
Castelazo, M (2012) China's solar industry and the u.s. anti-dumping/anti-subsidy trade case. The Kearny Alliance Project.Google Scholar
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), 84–95.Google Scholar
Conrad, K and Wang, J (1993) On the design of incentive mechanisms in environmental policy. Environmental and Resource Economics 3(3), 245–262.Google Scholar
Dolan, SL and Heath, GA (2012) Life cycle greenhouse gas emissions of utility-scale wind power. Journal of Industrial Ecology 16), S136–S154.Google Scholar
Duval, Y and Hamilton, SF (2002) Strategic environmental policy and international trade in asymmetric oligopoly markets. International Tax and Public Finance 9(3), 259–271.Google Scholar
Eaton, J and Grossman, GM (1986) Optimal trade and industrial policy under oligopoly. The Quarterly Journal of Economics 101(2), 383–406.Google Scholar
Ederington, J. and Minier, J (2003) Is environmental policy a secondary trade barrier? An empirical analysis. Canadian Journal of Economics 36(1), 137–154.Google Scholar
Etro, F (2011) Endogenous market structures and strategic trade policies. International Economic Review 52(1), 63–84.Google Scholar
Fujiwara, K (2009) Environmental policies in a differentiated oligopoly revisited. Resource and Energy Economics 31(3), 239–247.Google Scholar
Greaker, M (2003) Strategic environmental policy; eco-dumping or a green strategy? Journal of Environmental Economics and Management 45(3), 692–707.Google Scholar
Hart, M (2012) Shining a light on U.S.-China clean energy cooperation. The Center for American Progress.Google Scholar
Haufler, A and Wooton, I (2010) Competition for firms in an oligopolistic industry: The impact of economic integration. Journal of International Economics 80(2), 239–248.Google Scholar
Hovi, J, Ward, H and Grundig, F (2014) Hope or despair? Formal models of climate cooperation. Environmental and Resource Economics 62(4), 1–24.Google Scholar
Hsu, DD et al. (2012) Life cycle greenhouse gas emissions of crystalline silicon photovoltaic electricity generation. Journal of Industrial Ecology 16, S122–S135.Google Scholar
IEA Trends 2013 in photovoltaic applications: Survey report of selected IEA countries between 1992 and 2012. IEA-PVPS T1-23:2013. International Energy Agency.Google Scholar
Janeba, E (1998) Tax competition in imperfectly competitive markets. Journal of International Economics 44(1), 135–153.Google Scholar
Katsoulacos, Y and Xepapadeas, A (1995) Environmental policy under oligopoly with endogenous market structure. The Scandinavian Journal of Economics 97(3), 411–420.Google Scholar
Kayalica, MÖ and Lahiri, S (2005) Strategic environmental policies in the presence of foreign direct investment. Environmental and Resource Economics 30(1), 1–21.Google Scholar
Kennedy, PW (1994) Equilibrium pollution taxes in open economies with imperfect competition. Journal of Environmental Economics and Management 27(1), 49–63.Google Scholar
Lahiri, S and Symeonidis, G (2007) Piecemeal multilateral environmental policy reforms under asymmetric oligopoly. Journal of Public Economic Theory 9(5), 885–899.Google Scholar
Liska, AJ et al. (2009) Improvements in life cycle energy efficiency and greenhouse gas emissions of corn-ethanol. Journal of Industrial Ecology 13(1), 58–74.Google Scholar
Mankiw, NG and Whinston, MD (1986) Free entry and social inefficiency. The RAND Journal of Economics 17(1), 48–58.Google Scholar
Markusen, JR, Morey, ER and Olewiler, N (1995) Competition in regional environmental policies when plant locations are endogenous. Journal of Public Economics 56(1), 55–77.Google Scholar
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), 1–22.Google Scholar
Reitzes, JD and Grawe, OR (1999) Entry policy and entry subsidies. Review of International Economics 7(4), 715–731.Google Scholar
Ruffin, RJ (1971) Cournot oligopoly and competitive behaviour. The Review of Economic Studies 38(4), 493–502.Google Scholar
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), 422–484.Google Scholar
Spencer, BJ and Brander, JA (1983) International R&D rivalry and industrial strategy. The Review of Economic Studies 50(4), 707–722.Google Scholar
Stähler, F and Upmann, T (2008) Market entry regulation and international competition. Review of International Economics 16(4), 611–626.Google Scholar
Stokes, LC (2013) The politics of renewable energy policies: The case of feed-in tariffs in ontario, canada. Energy Policy 56, 490–500.Google Scholar
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, 349–374.Google Scholar
Ulph, A (1996) Environmental policy and international trade when governments and producers act strategically. Journal of Environmental Economics and Management 30(3), 265–281.Google Scholar
Vives, X (2001) Oligopoly Pricing: Old Ideas and New Tools. Cambridge, Massachusetts: MIT Press.Google Scholar
Whalley, J (1991) The interface between environmental and trade policies. The Economic Journal 101(405), 180–189.Google Scholar
Wilson, JD (1999) Theories of tax competition. National Tax Journal 52(2), 269–304.Google Scholar
Zodrow, GR and Mieszkowski, P (1986) Pigou, tiebout, property taxation, and the underprovision of local public goods. Journal of Urban Economics 19(3), 356–370.Google Scholar
Supplementary material: PDF

Bayham et al. supplementary material

Online Appendix

Download Bayham et al. supplementary material(PDF)
PDF 474.5 KB