1,721,244 research outputs found
Environmental Policy and Strategic International Trade (forthcoming in G. Boerro and A. Silbertson (eds), Recent Advances in Environmental Economics, Macmillan)
No full textEnvironmental policy and international trade when governments and producers act strategically
No full textStrategic environmental policy, international trade and the single European market (forthcoming in environmental policy with economic and political integration, Edward Elgar)
No full textHarmonisation, minimum standards and optimal international environmental policy under asymmetric information
No full textThis paper is concerned with the role of a supra-national agency, such as the European Commission, say in influencing environmental policies set by national governments. One rationale for such intervention is the need to overcome incentives for national governments to engage in "environmental dumping", that is that national governments acting non-cooperatively may set environmental policies which are laxer than they would set if they acted cooperatively, the reason being that they seek to confer a competitive advantage on their domestic producers. It is sometimes proposed that to overcome such incentives a supra-national agency should harmonise environmental policies or set minimum standards for environmental policies. However, it is well known that harmonisation will not be efficient if countries differ, say with respect to environmental damage costs. In this paper I set out the simplest model in which environmental dumping occurs and show, not surprisingly, that harmonisation will not produce a Pareto improvement on the non-cooperative outcome if countries are sufficiently different with respect to environmental damage costs. I also show that minimum standards may not produce a Pareto improvement either if environmental policy instruments are strategic substitutes, and there may be limited scope for improvement on the non-cooperative outcome if they are strategic complements. This leaves the question why a supra-national agency does not just impose a cooperative solution which Pareto dominates the non-cooperative outcome. The reason explored in this paper is that the supra-national agency may be less well informed about national environmental damage costs than national governments. I derive the non-cooperative and cooperative equilibria with asymmetric information, and show that the cooperative equilibrium with asymmetric information sets environmental policies for countries with different environmental damage costs which are more similar than would be the case with full information. However this narrowing of the differences in environmental policies across countries with different damage costs falls well short of harmonisation, so asymmetries of information provide no basis for policies such as harmonisation
Plant location and strategic environmental policy with intersectoral linkages
No full textIn recent debates on trade liberalisation the concern has often been expressed that with more competitive international trade governments will be worried that by setting tougher environmental policies than their trading rivals they will put domestic producers at a competitive disadvantage, and in the extreme case this could lead to firms relocating production in other countries. The response by governments to such concerns will be to weaken environmental policies (‘eco-dumping’). In competitive markets such concerns are ill founded, but there is a small amount of literature which has analysed whether governments will indeed have incentives for eco-dumping in the more relevant case of markets where there are significant scale economies; even here there is no presumption that the outcome will involve eco-dumping.In this paper we extend the analysis of strategic environmental policy and plant location decisions by analysing the location decision of firms in different sectors which are linked through an input-output structure of intermediate production. The reason why we introduce inter-sectoral linkages between firms is that they introduce an additional factor, relative to those already analysed in the literature, in the plant location decision, which is the incentive for firms in different sectors to agglomerate in a single location. This has a number of important effects. First, there is now the possibility of multiple equilibria in location decisions of firms. Following from this there is the possibility of catastrophic effects where a small increase in an environmental tax can trigger the collapse of an industrial base in a country; however there is also the possibility that a country which raises its environmental tax could attract more firms to locate in that country, because of the way the tax affects incentives for agglomeration. Finally, and again related to the previous effects, there is the possibility of a hysteresis effect where raising an environmental tax in one country can cause firms to relocate to another country, but subsequently lowering that tax will not induce firms to relocate back into the original country.We consider a simple model with two countries, two industries, an upstream and a downstream sector, and two firms per industry. The analysis proceeds through a three-stage game: in the first stage the governments of the two countries set their environmental policies; in the second stage the firms in both industries choose how many plants to locate and where; in the third stage firms choose their output levels, with the demand for the upstream firms being determined endogenously by the production decisions of the downstream firms. We assume that there are no limits to production capacity, so that firms do not build more than one plant in any country. However, firms may build plants in different countries because of positive transport costs. Although the model appears very simple, it cannot be solved analytically, so all the conclusions must be drawn from numerical simulations
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