Piecemeal Multilateral Environmental Policy Reforms under Asymmetric Oligopoly

Abstract

We develop a general two-country model with oligopolistic interdependence in which a fixed number of firms make their output and emission decisions simultaneously. We examine the effect of multilateral reforms of emission taxes on global emission levels. With sufficient asymmetry in pollution intensities between the two countries, a proportional multilateral increase in emission tax rates can increase global emission levels. However, a multilateral equal increase of emission tax rates unambiguously reduces global emission levels. We also consider the case of free entry and exit of firms, and find a rule of multilateral reforms which unambiguously lowers total emission levels. Copyright 2007 Blackwell Publishing, Inc..

Horizontal product differentiation and policy adjustment in the presence of abatement subsidies and emission taxes

“…12. The pollution intensity coefficient, d, is given by ÀC eq =C ee ; see Lahiri and Symeonidis (2007). 13.…”

“…I shall assume a cost function of the end-of-pipe to capture abatement efforts by firms as in Lahiri and Symeonidis (2007). In particular, each firm i's costs depend on output, q i , and emissions, e i , where the cost function is given byC i ðq i ; e i Þ ¼ĉ i q i þ ðdq i À e i Þ 2 =2…”

“…4 In the context of horizontal product differentiation Poyago-Theotoky (2003) shows, in Cournot competition where firms choose environmental R&D strategically and are subject to an emission tax and R&D subsidy, that the optimal tax is less than marginal damages and the subsidy may be positive or negative in the short-run; the author, however, does not consider the case of free-entry, an aspect considered in Section 2.2. 5 Moreover, Lahiri and Symeonidis (2007) and Gautier (2013) examine policy reform in an international context in the presence of horizontal product differentiation. However, none of these works analyses the adjustment of policy arising from changes in the degree of product differentiation and the resulting effect on industry emissions.…”

Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity

“…Indeed, it can be proved that, within the admissible parameter range, e s > s holds, being e s thus located in the high transport cost area. 27 Moreover, it can be shown that e s belongs to a range of s values such that an equilibrium (either P R or N R) exists. In addition, noticing that the e s threshold increases in G, when considering the upper tail of admissible G values, e s tends to become very high.…”

Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity

“…However the extent of the technology gap per se does not lead necessarily to correct policy prescriptions. Lahiri and Symeonidis (2007) suggest that, with a small technology gap, unilateral mitigation measures lead to a contraction in global pollution. We show here that, when removing their assumptions on (a) exogenous plant location with …rms producing only in the domestic market and exporting abroad and (b) symmetry in the size of the two areas, this …nding may not hold.…”