27 research outputs found
Stable International Environmental Agreements: An Analytical Approach
In this paper we examine the formation of International Environmental Agreements (IEAs). We show that the welfare of the signatories does not increase monotonically with respect to the number of signatories. We provide an analytical solution of the leadership model. In particular, we find that the unique stable IEA consist of either two, three or four signatories if the number of countries is greater than 4. Furthermore, we show that the welfare of the signatories is almost at its lowest level when the IEA is stable. While in our model countriesâ choice variable is emissions, we extend our results to the case where the choice variable is abatement efforts.
Permis dâĂ©mission nĂ©gociables et rĂ©glementation dans des marchĂ©s de concurrence imparfaite
Cette Ă©tude prĂ©sente un duopole de Cournot soumis Ă une rĂ©glementation environnementale. Deux types dâapproche sont Ă©tudiĂ©s : lâapproche « ordre et contrĂŽle » et les permis dâĂ©mission nĂ©gociables. Lâanalyse dĂ©montre quâun systĂšme de permis dâĂ©mission nĂ©gociables est plus efficace que lâapproche « ordre et contrĂŽle » quand le marchĂ© des permis est concurrentiel, mais quâil est moins efficace quand une des entreprises est capable de fixer le prix dans le marchĂ© des permis. Dans un duopole Ă la Cournot, lâentreprise capable de fixer le prix des permis cherche Ă faire augmenter les coĂ»ts de son concurrent afin dâaugmenter sa part du marchĂ© des produits. Dans un systĂšme de permis dâĂ©mission nĂ©gociables, lâĂtat peut initialement vendre les permis aux enchĂšres ou les distribuer sans frais (grandfathering). Il est dĂ©montrĂ© que lorsque le marchĂ© des permis est concurrentiel, les deux systĂšmes dâallocation initiale des permis sont efficaces, tandis que lorsquâil y a pouvoir de marchĂ©, la vente aux enchĂšres est plus efficace que la distribution gratuite des permis.This paper develops a model of a homogeneous Cournot duopoly subject to environmental regulation. Two systems of regulation are examined. A source-specific system (command and control) and a market-based system (tradeable emission permits). It is shown that tradeable emission permits are more efficient than command and control when the permit market is competitive but that it is less efficient when one of the duopolists is a price setter in the permit market. Under Cournot conjectures, the price setter in the permits market seeks to raise its rival's costs in order to increase its market share. Under a tradeable emission permits system, the government can either initially auction the permits or distribute them free of charge (grandfathering). It is shown that with a competitive permit market, both types of initial allocation are efficient. However, with a price setter in the permit market, auctioning is more efficient than grandfathering
The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes: Empowering Consumers to Choose Optimally
The present paper examines, within a dynamic framework, the use of information provision as a policy instrument to supplement environmental taxation. We assume that at least a fraction of consumers do not posses the required information to make the optimal choices, and that their behavior at each time period depends on the accumulated stock of information. We show that, as the accumulated stock of information provision increases, both the optimal level of information provided at each period of time and the optimal tax rate decline over time. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies. Information provision can shift the demand towards environmentally friendly products over time and thus, reduce the required level of the tax rate.Information Provision, Environmental Taxation
Corruption and Environmental Policy: An Alternative Perspective
We construct an overlapping generations model in which agents live through two periods; childhood and adulthood. Each agent makes choices only as an adult, based on her utility that depends on her own consumption and the human capital and environmental quality endowed to her offspring. Entering adulthood, agents choose randomly between two occupations: citizens and politicians. Citizens are the only producers of a single good and choose the proportion of their income to declare to the tax authorities. Politicians decide upon the allocation of the tax revenue between environmental protection and education activities, taking as given the rates of peculation in each activity. In this context, two self-fulfilling stable equilibria can emerge, one associated with high and another with low corruption. Corrupted politicians induce high levels of tax evasion, reducing total public funds and thus environmental protection activities. This result is in accordance with existing empirical evidence and implies that environmental policies may fail in corrupt countries where they are used as means of supporting rent seeking activities instead of protecting the environment. A higher level political authority could intervene and force the low corruption equilibrium by choosing the appropriate tax rate and, through institutional changes, the rates of peculation.Corruption, Environmental Policy
International Environmental Agreements - The Role of Foresight
We examine the formation of International Environmental Agree- ments (IEAs). We extend the existing literature by endogenizing the reaction of the IEA's members to a deviation by a member or a group of members. We assume that when a country contemplates exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify conditions under which there always exists a unique set of farsighted stable IEAs. The new farsighted IEAs can be much larger than those some of the previous models supported but are not always Pareto efficient. We extend the analysis to allow for coordinated action, that is, groups of countries jointly exiting or entering the agreement and fully characterize the coalitionally farsighted stable IEAs
International Environmental Agreements -The Role of Foresight
We examine the formation of International Environmental Agreements (IEAs). We extend the existing literature by endogenizing the reaction of the IEA's members to a deviation by a member or a group of members. We assume that when a country contemplates exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify conditions under which there always exists a unique set of farsighted stable IEAs. The new farsighted IEAs can be much larger than those some of the previous models supported but are not always Pareto efficient. We extend the analysis to allow for coordinated action, that is, groups of countries jointly exiting or entering the agreement and fully characterize the coalitionally farsighted stable IEAs.International Environmental Agreements, Public good provision, Coalition formation, Foresight
Uncertainty and the Double Dividend Hypothesis
This paper examines the double dividend hypothesis in the presence of labour income uncertainty. Empirical evidence shows that uncertainty over labour income is particularly significant in developing, while not negligible in developed countries. Under uncertainty, and assuming incomplete capital markets, the tax system plays a role in providing social insurance and a green tax reform influences its effectiveness. We show that the increase in environmental tax reduces consumption risk while the balanced budget decrease in labour income tax increases income risk. We find that the total welfare effect of a green tax reform differs substantially from the case of certainty. The critical parameters determining the existence of a second dividend are the lump sum transfers, the relative substitutability of the two goods for leisure and the initial tax rates relative to their optimal that determine also the response of labour supply to a change in the tax mix
2000, Environmental Externalities in the Presence of Network Externalities: The Automobile
Abstract The paper considers a market currently dominated by a dirty technology that imposes significant environmental costs. A clean technology, with zero environmental costs, is introduced after the maturity of the dirty technology's network. Adoption of the clean technology is not possible due to the network benefits in favour of the dirty technology. The paper considers two types of policy intervention to correct for the environmental externality. First, we find that the tax necessary to induce adoption of the clean technology is very high implying that a tax equal to the marginal environmental damage would not resolve the externality problem in many cases. Second, if tax revenues are earmarked towards subsidizing the clean technology, the tax is lower than in the previous case and can be set equal to the marginal external damage