Strategic environmental policy and the mobility of firms

Arbeitspapier

The loss of international competitiveness of domestic industries remains a key obstacle to the implementation of effective carbon prices in a world without harmonized climate policies. We analyze countries' non-cooperative choices of emissions taxes under imperfect competition and mobile polluting firms. In our general equilibrium setup with trade, wage effects prevent all firms from locating in the same country. While under local or no pollution countries achieve the first-best, under transboundary pollution taxes are inefficiently low and lower than under autarky where only the "standard" free riding incentive distorts emissions taxes. This effect is more pronounced when polluting firms are mobile.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KCG Working Paper ; No. 14

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade and Environment ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Subject: FDI ; Strategic Environmental Policy ; Firm Location ; Carbon Leakage ; General Equilibrium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Richter, Philipp M. ; Runkel, Marco ; Schmidt, Robert C.
• Event: Veröffentlichung
• (who): Kiel Centre for Globalization (KCG)
• (where): Kiel
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/196153
• Last update: 10.03.2025, 11:45 AM CET