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We build a two regions general equilibrium model with cross-border pollution and either international or only inter-regional capital mobility. To control pollution each region uses public pollution abatement and issues either intra-regionally or inter-regionally tradable emission permits. We...
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, we study the effects of a tax on one pollutant in two cases: one where both pollutants face taxes and the second where … important parameters. We demonstrate two important ways that environmental taxes and permits are not equivalent. First, the … affected by this spillover effect. Finally, a numerical exercise helps demonstrate these two ways that taxes and permits differ …
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