Optimal Environmental Policy Differentials Under Emissions Constraints

Tinbergen Institute Discussion Paper No. 2003-080/3

29 Pages Posted: 2 Jan 2004

See all articles by Raymond J.G.M. Florax

Raymond J.G.M. Florax

Purdue University; VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Abay Mulatu

London School of Economics & Political Science (LSE) - Department of Economic History

Cees Withagen

Free University of Amsterdam; Tilburg University

Date Written: October 1, 2003

Abstract

Is there a case to be made for preferential treatment of the exposed sector in an economy when compliance to an aggregate emissions constraint induced by an international environmental agreement is mandatory? This question is being debated in many countries, including The Netherlands, in the context of the implementation of the Kyoto protocol. We address this issue in a general equilibrium framework in this paper, and theoretically cover several market structures, including perfect competition, oligopoly and the large country case. Our main finding is that in many circumstances preferential treatment is not warranted from the point of view of maximizing social welfare.

Keywords: Ecological dumping, general equilibrium, emissions constraints, Kyoto protocol

JEL Classification: D6, F12, Q28

Suggested Citation

Florax, Raymond J.G.M. and Mulatu, Abay and Withagen, Cees A. M., Optimal Environmental Policy Differentials Under Emissions Constraints (October 1, 2003). Tinbergen Institute Discussion Paper No. 2003-080/3. Available at SSRN: https://ssrn.com/abstract=461200 or http://dx.doi.org/10.2139/ssrn.461200

Raymond J.G.M. Florax

Purdue University ( email )

West Lafayette, IN 47907-1145
United States
(765) 494-4300 (Phone)
(765) 494-9176 (Fax)

HOME PAGE: http://web.ics.purdue.edu/~rflorax/

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 444 6092 (Phone)
+31 20 444 6004 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Abay Mulatu

London School of Economics & Political Science (LSE) - Department of Economic History ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Cees A. M. Withagen (Contact Author)

Free University of Amsterdam ( email )

Tinbergen Institute De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Tilburg University ( email )

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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