Emission Permits and Public Pollution Abatement: Can Decentralized Environmental Policies Be Efficient?

28 Pages Posted: 13 Apr 2015

See all articles by Nikos Tsakiris

Nikos Tsakiris

University of Ioannina - Department of Economics

Panos Hatzipanayotou

Athens University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Michael S. Michael

University of Cyprus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 31, 2015

Abstract

We build a two regions general equilibrium model with cross-border pollution and either international or only inter-regional capital mobility. To control pollution each region uses public pollution abatement and issues either intra-regionally or inter-regionally tradable emission permits. We analyze the non-cooperative (decentralized) and cooperative (centralized) equilibrium level of emission permits and we examine when and how cross-border pollution and the type of capital mobility affect these equilibrium policies. We provide the welfare ranking of the policies in the various cases and we investigate under what conditions the decentralized and centralized equilibrium policies are equally efficient.

Keywords: cross-border pollution, tradable emission permits, international capital mobility, public pollution abatement

JEL Classification: F180, F210, H210

Suggested Citation

Tsakiris, Nikos and Hatzipanayotou (Xatzipanagiotou), Panagiotis (Panos) and Michael, Michael S., Emission Permits and Public Pollution Abatement: Can Decentralized Environmental Policies Be Efficient? (March 31, 2015). CESifo Working Paper Series No. 5278, Available at SSRN: https://ssrn.com/abstract=2593696 or http://dx.doi.org/10.2139/ssrn.2593696

Nikos Tsakiris

University of Ioannina - Department of Economics ( email )

45110 Ioannina
Greece

Panagiotis (Panos) Hatzipanayotou (Xatzipanagiotou) (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Michael S. Michael

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
357-22892433 (Phone)
357-22892432 (Fax)

HOME PAGE: http://www.econ.ucy.ac.cy/staff/michael.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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