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Regulatory Stringency and Emission Leakage Mitigation

Author

Listed:
  • Fabio Antoniou

    (Athens University of Economics and Business)

  • Panos Hatzipanayotou

    (Athens University of Economics and Business)

  • Nikos Tsakiris

Abstract

We construct a two-country trade model where emissions are an input in production and generate cross-border pollution. We examine the strategic incentives of an active regulator that sets a binding level of emissions in production. We show that, in the presence of terms of trade and emission leakage strategic motives, tighter regulation can mitigate emission leakage, reduce global pollution, and improve a country's welfare. This result and the corresponding policy implications depend on the relative magnitude of emissions intensities of goods between sectors and on their relationship in production and consumption.

Suggested Citation

  • Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2023. "Regulatory Stringency and Emission Leakage Mitigation," DEOS Working Papers 2302, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:2302
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    More about this item

    Keywords

    Environmental Regulation; International Trade; Emission Leakage; Cross-border Pollution;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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