A new GLO Discussion Paper finds that “green” subsidies can lead to a win-win situation for export countries.
GLO Discussion Paper No. 1240, 2023
Green subsidies as strategic trade policy tools – Download PDF
by Buccella, Domenico & Fanti, Luciano & Gori, Luca
GLO Fellow Luca Gori
Author Abstract: In a three-country model in which export countries adopt environmental policies, this note analyses how abatement (“green”) subsidy can become a potential strategic trade policy tool. When governments set the optimal policy tool considering their local environmental damages, a rich set of equilibria arise. In contrast to the standard result, it is shown that subsidising pollution abatement can 1) emerge as a Pareto-efficient equilibrium of the game; and 2) be the only feasible environmental policy when environmental awareness is low, irrespective of the technological efficiency. Therefore, “green” subsidies can lead to a win-win situation.
Vol. 36, Issue 2, April 2023: Journal of Population Economics (JOPE) 16 articles.
Vol. 36, Issue 1, January 2023: Journal of Population Economics (JOPE) 16 articles. https://link.springer.com/journal/148/volumes-and-issues/36-1
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