We study the co-ordination of environmental policy within an agreement in the context of international trade. In a-n country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments chose strategically an emmission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to to allow for some form of policy coordination, though full cooperation will never be obtained.
|Place of Publication||Bath, U. K.|
|Publisher||Department of Economics, University of Bath|
|Publication status||Published - Feb 2017|
|Name||Bath Economics Research Working Papers|
Finus, M., & Al Khourdajie, A. (2017). Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety. (Bath Economics Research Working Papers; Vol. 60/17). Department of Economics, University of Bath.