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Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution
Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution
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Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution
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Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution
Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution
Journal Article

Environmental Policy in an Open Economy: Transboundary Pollution and Local Pollution

2015
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Overview
The paper employs a duopolistic model to analyze the optimal environmental policy for an exporting country given that the exporting firms may emit local pollution and transboundary pollution to the neighboring countries. We find that the optimal environmental policy for the exporting country is to levy tax on firms that only emit local pollution; whereas it is optimal to subsidize (tax) the exporting firms that may cause local and transboundary pollution in the circumstance that the marginal damage of transboundary pollution is relatively large (small). Furthermore, the importing country should impose a higher tax on the higher-cost exporting firm if the higher-cost exporting firm emits pollution that causes relatively smaller marginal damage to the importing country.
Publisher
Soochow University