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- Title
Second Best Environmental Policies under Uncertainty.
- Authors
Antoniou, Fabio; Hatzipanayotou, Panos; Koundouri, Phoebe
- Abstract
We construct a strategic environmental policy model of an international duopoly. Governments use environmental policies, such as an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to firms, however, governments are unable to perfectly foresee the actual level of demand and the cost of abatement. Our results suggest that not only the presence but also the absolute level of uncertainty matters for the optimal choice of the environmental policy instrument. Moreover, the optimality conditions under strategic behavior may lead to welfare losses relative to the cooperative outcomes because of under-regulation and lack of policy coordination between the two countries.
- Subjects
ENVIRONMENTAL policy; EMISSIONS (Air pollution); AIR pollution; EMISSION standards; AIR pollution laws
- Publication
Southern Economic Journal, 2012, Vol 78, Issue 3, p1019
- ISSN
0038-4038
- Publication type
Article
- DOI
10.4284/0038-4038-78.3.1019