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Essays in environmental regulation and international trade

University of British Columbia

This thesis is composed of three essays. In the first essay I identify the effects of imposing a broad range of environmental regulations under different market conditions.. I compare four types of regulatory controls under Perfect Competition, Monopoly, and Cournot Competition: Emission Standards, Design Standards, Concentration Standards, and Output Standards. I rank each of the standards in terms of firm profitability, industry output, abatement costs, and social welfare. I derive sufficient conditions for Design, or Concentration Standards, to dominate Emission Standards. I show how the different forms of regulation can raise industry profits by reducing the degree of inter-firm competition. Further, I show how environmental regulations can enhance competition and yield a "double dividend": higher Social Surplus and less pollution. In the second essay I extend the comparison of standards to an open country. I show how a country's choice of regulatory regime influences the level of environmental protection when governments care about the competitiveness of their industries. I show that the mode of regulation can create a "race to the bottom" if regulators behave strategically. I show that Emission Standards permit the race, as do Emission Charges. Design Standards, on the other hand, avoid the race altogether by breaking the link between environmental stringency and industrial competitiveness. Countries using Design Standards will always regulate emissions. This holds regardless of the environmental stance taken by competitor nations. If countries do not behave strategically, then Emission Standards and Emission Charges always dominate Design Standards. In the third essay I use the concept of home biases in traded goods, or "Border Effects", to rank industries and countries in terms of their openness to trade. I first confirm the presence border effects for individual sectors and individual industries among OECD countries for 1970 to 1985. I also examine whether country-specific border effects are determined by the sectoral composition of a country's production. I find limited evidence to support this. Rather, per capita incomes appear to be the most important factor. The conclusion I draw is that the level of development appears to be the prime factor in explaining the differences in country-specific border effects. What countries produce is of some importance. Therefore, we should see continued, though possibly slow, reductions in home biases as all countries continue to develop. This will partially determine the kind of environmental regulation used as well as their level.

Thesis/Dissertation

application/pdf

2009-07-21

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http://hdl.handle.net/2429/11110

Economics

University of British Columbia

UBCV

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