Domestic and international strategic interactions in environment policy formation

Kiyono, Kazuharu; Okuno-Fujiwara, Masahiro
March 2003
Economic Theory;2003, Vol. 21 Issue 2/3, p613
Academic Journal
In this paper, we establish the most possible general formulation of the technology governing carbon-gas emission, giving rise to global external diseconomies, and try to explore into the strategic interactions, both domestic and international, when an individual country decides on the environmental policies. Through the comparison among emission taxes, quotas, and standards in the perfectly competitive private economies, we find that the first two policies are equivalent but they are different in effects by virtue of what we may call the tax-exemption effect of emission standards. Such a difference in the policy effect further affects the other country's welfare through the global externalities, amplified through whether the government can precommit to either the emission tax or the emission standard.


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