Environmental dumping

Abstract: Concerns have been expressed that in a global market place with mobile capital, national governments will have incentives to set weak environmental policies ("environmental dumping") to protect the international competitiveness of their domestic firms and that these incentives are particularly strong in industries where plants may be relatively footloose so that governments are concerned to prevent "capital flight". In this paper we investigate whether the mobility of firms does indeed increase incentives for environmental dumping. We do this by taking a simple model of imperfect competition and comparing the environmental policies that would be set by non-cooperative governments for two different move structures - where governments set environmental policies after firms decide where to locate (the exogenous location case or Market Share Game) and where governments set environmental policies before firms decide where to locate (the endogenous location case or Location Game). This raises an important modelling issue for it is natural in the Market Share Game that governments would set different environmental policies depending on the number of firms that locate in their countries, and if we are to compare just the effect of different move structures then in the Location Game we should also allow governments to condition their environmental policies on the number of firms that locate in them, contrary to previous models of the Location Game where governments set a single instrument independent of the number of firms that locate in their countries. We show that the extent of environmental dumping in the Market Share Game may be greater or less than in the Location Game, depending in particular on the degree of substitution between products of the firms and hence the intensity of market competition. We also show that there is more environmental dumping in the Location Game when governments use a single instrument than when they condition their instruments on the number of firms that locate in their countries.

Abstract: The paper investigates the relationship between environmental quality and economic growth in Nigeria using a fractional cointegration analysis over the period 1970-2011. It seeks to examine the effect of growth on environmental performance by controlling for the role of institutional quality, trade openness and population density. The paper found that early stages of development in Nigeria accentuate the level of environmental degradation. It also finds that weak institutions and unrestricted trade openness increase the extent of environmental degradation due to environmental dumping. Finally, the paper shows that a larger population density enhances the promptness of environmental abatement measures and consciousness for cleaner environment. The study, however, failed to attain a reasonable turning point and hence a non-existence of EKC in Nigeria. The paper recommends the need to restrict the importation of emission intensive products, check the activities of multi-nationals which invest in producing high CO2 emitting goods in LDCs and exports to home countries. Finally, there is need to strengthen institutional quality to ensure adoption of clean technologies as income rises.

Abstract: This paper analyses some of the most important spillovers of recent developments of economic theory into environmental economics. Attention is given to the anlaysis of sustainable economic development paths, where endogenous growth models are used; the implications of environmental dumping and more generally of policies concerning global environmental issues, where new trade theories are very useful; and, the effectiveness of environmental policy instruments when markets are imperfectly competitive, where industrial organisation theory is employed. The paper does not only note recent developments in environmental economics, but also relates these to the previous environmental economics literature. Thus, it can be assessed whether new results actually improve our knowledge of crucial economic and environmental issues.