National Treatment and the Optimal Regulation of Environmental Externalities

27 Pages Posted: 2 Oct 2008

See all articles by Sumeet Gulati

Sumeet Gulati

affiliation not provided to SSRN

Devesh Roy

University of Maryland - Department of Economics

Abstract

We analyze the role of National Treatment in the regulation of environmental product standards for an open economy. A social planner uses product standards to control emissions from the consumption of a traded good. We show that whether National Treatment of standards interferes with welfare-maximizing policy depends on the instruments available to the policy maker (consumption or emissions tax) and differences in the cost of complying with the standard. We also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal. This asymmetric incidence can also cause welfare-maximizing policy to violate National Treatment.

Suggested Citation

Gulati, Sumeet and Roy, Devesh, National Treatment and the Optimal Regulation of Environmental Externalities. Canadian Journal of Economics/Revue canadienne d'économique, Vol. 41, Issue 4, pp. 1445-1471, November/novembre 2008, Available at SSRN: https://ssrn.com/abstract=1276697 or http://dx.doi.org/10.1111/j.1540-5982.2008.00511.x

Sumeet Gulati (Contact Author)

affiliation not provided to SSRN ( email )

Devesh Roy

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

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