Lapan, H and Sikdar, S (2017) Is Trade in Permits Good for the Environment? Environmental and Resource Economics. pp. 1-10. ISSN 1573-1502

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Abstract

We analyze the impact of trade in emission permits on environmental policy when countries trade a differentiated good. Pollution is always higher with tradable permits as compared to the case where permits are not internationally tradable. If pollution is a pure global public bad, i.e., the marginal damage from transboundary pollution is the same as that from local pollution, the permit price under trade equals the domestic marginal damage from own emissions. If pollution is not a pure global public bad, i.e., the marginal damage from transboundary pollution is less than that from local pollution, trade results in a permit price lower than the domestic marginal damage from own emissions—pollution is higher under trade relative to autarky. Regardless of the nature of transboundary pollution, the permit price (equivalent pollution tax) is lower and pollution is higher with internationally tradable permits than with nontradable permits.

Item Type: Article
Additional Information: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Uncontrolled Keywords: Emission Permit Trade; Strategic environmental policy; Leakage; Intra-industry trade
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HC Economic History and Conditions
Divisions: Faculty of Humanities and Social Sciences > Keele Management School
Depositing User: Symplectic
Date Deposited: 04 Jan 2018 10:44
Last Modified: 25 Jun 2018 12:56
URI: http://eprints.keele.ac.uk/id/eprint/4325

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