Taxing Variable Cost: Environmental Regulation as Industrial Policy

Simpson, R. David; Bradford, Robert L.

doi:10.1006/jeem.1996.0019

Cited by 182 publications

(107 citation statements)

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“…Firstly, the possibility that an environmental regulation generates a win-win situation is shown to be a rather exceptional result that only holds for a relatively narrow sub-set of parameter values. For example, in [18] it is argued that the Porter hypothesis is likely to hold only in very special cases. Similarly, in [2] the possibility to attain a Porter result is confined only to those parameters satisfying a very specific condition.…”

Section: Relationship With the Previous Literaturementioning

confidence: 99%

“…In this respect, Simpson and Bradford [18] conclude that using more stringent environmental policies to motivate investment in order to increase domestic industrial advantage "may be a theoretical possibility, but it is extremely dubious as practical advice" (p. 296). Mohr [10] argues that an environmental policy that produces results consistent with the Porter hypothesis is not necessarily optimal.…”

Section: Relationship With the Previous Literaturementioning

confidence: 99%

“…In an economic growth framework, Hart [8] shows that an environmental policy could foster R&D activities and increase growth. Simpson and Bradford [18] show in an international trade model that a strengthening of regulation may result in a shift of profits from foreign to domestic firms because of the presence of international externalities. There are some papers that report intra-firm mechanisms through which environmental regulation can induce the adoption of profit-enhancing innovations.…”

Section: Introductionmentioning

confidence: 99%

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Strategic quality competition and the Porter Hypothesis

André

González

Porteiro

2009

Journal of Environmental Economics and Management

110

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In this paper we provide a theoretical foundation for the Porter hypothesis in a context of quality competition. We use a duopoly model of vertical product differentiation where firms simultaneously choose the environmental quality of the good they produce (which can be either high or low) and, afterwards, engage in price competition. In this simple setting, we show that a Nash equilibrium of the game with low quality could be Pareto dominated by another strategy profile in which both firms produce the high environmental quality good.We then show how, in this case, the introduction of a penalty to any firm that produces the low environmental quality can result in an increase in both firms' profits. The impact of the policy on consumers depends on the effect of a quality shift on the cost structure of firms.JEL classification: L13, L51, Q55, Q58.

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Section: Relationship With the Previous Literaturementioning

confidence: 99%

Section: Relationship With the Previous Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Strategic quality competition and the Porter Hypothesis

André

González

Porteiro

2009

Journal of Environmental Economics and Management

110

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“…The latter assumption, which allows for omitting consumer surplus in calculating welfare levels, is standard in models of strategic environmental policy that focus on rent-seeking aspects (e.g. CONRAD 1993 andSIMPSON &BRADFORD 1996). Inverse market demand is linear and downward sloping, i.e.…”

Section: The Modelmentioning

confidence: 99%

“…These multistage games, which basically are a modification of the classic strategic trade models (SPEN- CER & BRANDER 1983, BRANDER & SPENCER 1985, consider the above described noncooperative decisions about the respective strength of environmental policies in different setups. The latter comprise analyses of the interdependencies of emission taxes and subsidies (CONRAD 1993), varying configurations of competition and market structure (BARRETT 1994), the impact of emission-reducing R&D expenditures (SIMPSON & BRADFORD 1996, ULPH & ULPH 1996 or the inclusion of an environmental service sector (FEESS & MUEHLHEUSSER 2002). However, Bárcena-Ruiz (2006) shows that simultaneous decision making is not the only possible setup: countries may move sequentially due to the impact of transboundary pollution.…”

Section: Introductionmentioning

confidence: 99%

The impact of policy diffusion on optimal emission taxes

Michaelis

Ziesemer

2013

Environ Econ Policy Stud

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may PETER MICHAELIS and THOMAS ZIESEMERWe incorporate the process of policy diffusion (i.e. the uncoordinated dissemination of policies among countries) into a probabilistic two-country-model of strategic environmental policy. Contrary to the usual setting with simultaneous decision making we consider the impact of sequential decision making: In the first step the domestic government introduces an emission tax, in the second step policy diffusion occurs with a certain probability and in the third step the firms decide on output quantities. Within this framework we analyze how the prospect of policy diffusion, motivated by a higher damage parameter in the domestic country, influences the optimal domestic emission tax. We show that if the damage parameter in the foreign country is sufficiently high policy diffusion will occur which leads to higher tax rates and higher welfare compared to the equilibrium resulting from simultaneous decision making. Moreover, we show that an increase in the domestic tax rate also increases the probability that the foreign country adopts the tax policy.

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The relationship between the environmental and economic performance of firms: an empirical analysis of the European paper industry

Wagner

Phu²,

Azomahou³

et al. 2002

Corp Soc Responsibility Env

370

261

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This paper examines the relationship between the environmental and economic performance of firms in the European paper manufacturing industry. It initially discusses possible functional relationships between environmental and economic performance rooted in different theoretical frameworks and links these to recent empirical and theoretical analyses of the Porter hypothesis. Following this, it reports the results of an empirical study carried out in the European paper industry. Findings fit better with ‘traditionalist’ reasoning about the relationship between environmental and economic performance, which predicts the relationship to be uniformly negative. In particular they confirm the necessity for a more differentiated view of the Porter hypothesis. Copyright © 2002 John Wiley & Sons, Ltd. and ERP Environment.

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Taxing Variable Cost: Environmental Regulation as Industrial Policy

Cited by 182 publications

References 0 publications

Strategic quality competition and the Porter Hypothesis

Strategic quality competition and the Porter Hypothesis

The impact of policy diffusion on optimal emission taxes

The relationship between the environmental and economic performance of firms: an empirical analysis of the European paper industry

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