Endogenous Environmental Policy when Pollution is Transboundary
Research output: Working paper › Working papers
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Lüneburg: Institut für Volkswirtschaftslehre der Universität Lüneburg, 2011. (Working Paper Series in Economics; Vol. 195).
Research output: Working paper › Working papers
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TY - UNPB
T1 - Endogenous Environmental Policy when Pollution is Transboundary
AU - Fünfgelt, Joachim
AU - Schulze, Günther G.
PY - 2011/2
Y1 - 2011/2
N2 - We analyze the formation of environmental policy to regulatetransboundary pollution if governments are self-interested. In a common agencyframework, we portray the environmental policy calculus of two political support-maximizing governments that are in a situation of strategic interaction withrespect to their environmental policies, but too small to affect world marketprices. We show how governments systematically deviate from socially optimalenvironmental policies. Taxes may be too high if environmental interests andpollution-intensity of production are very strong; under different constellationsthey may be too low. Governments may actually subsidize the production of apolluting good. Politically motivated environmental policy thus may be moreharmful to the environment as compared to the benevolent dictators’ solution. Inother cases it may enhance environmental quality and welfare beyond what abenevolent government would achieve.
AB - We analyze the formation of environmental policy to regulatetransboundary pollution if governments are self-interested. In a common agencyframework, we portray the environmental policy calculus of two political support-maximizing governments that are in a situation of strategic interaction withrespect to their environmental policies, but too small to affect world marketprices. We show how governments systematically deviate from socially optimalenvironmental policies. Taxes may be too high if environmental interests andpollution-intensity of production are very strong; under different constellationsthey may be too low. Governments may actually subsidize the production of apolluting good. Politically motivated environmental policy thus may be moreharmful to the environment as compared to the benevolent dictators’ solution. Inother cases it may enhance environmental quality and welfare beyond what abenevolent government would achieve.
KW - Sustainability sciences, Management & Economics
KW - Altruism
KW - externality
KW - moral motivation
KW - motivation crowding
KW - Pareto efficiency
KW - regulation
KW - responsibility
KW - taxes
KW - provision of information
KW - Economics
KW - Altruism
KW - externality
KW - moral motivation
KW - motivation crowding
KW - Pareto efficiency
KW - regulation
KW - responsibility
KW - taxes
KW - provision of information
M3 - Working papers
T3 - Working Paper Series in Economics
BT - Endogenous Environmental Policy when Pollution is Transboundary
PB - Institut für Volkswirtschaftslehre der Universität Lüneburg
CY - Lüneburg
ER -