Emission Tax and Compensation Subsidy with Cross-Industry Pollution

Abstract

This paper establishes a cross-industry pollution externality model. To explain a benevolent government, it may be possible to tax part of the welfare gains and use the revenue to compensate the affected polluted industry for the damage cost, thereby improving welfare. We show that the social welfare under emission tax with production subsidy is higher than the results of emission tax without production subsidy. The welfare of the polluted sector under emissions trading will be lower than the results of unbalanced budget environmental policy with subsidy. The welfare of the polluted labor union under lobby for compensation will be higher than the results of environmental policy with subsidy if the pollution damage and the weight on political contributions are sufficiently high.

What Drives Green Innovation? A Game Theoretic Analysis of Government Subsidy and Cooperation Contract

“…To promote the development of green innovation, governments often use incentive and deterrent policies to exert positive and negative external influences on enterprises [17,[37][38][39]. In recent years, researchers have conducted quantitative research on the impact of government intervention on green supply chain decision-making.…”

“…The second related stream of research is governmental intervention in green supply chains. Governments often use incentive and deterrent policies to exert positive and negative external influences on enterprises [17,[37][38][39]. However, in the early literature, the impact of government financial interventions on green supply chains was rarely considered [37].…”

Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading

“…In particular, a three-stage Stackelberg game is considered in which: (1) the government in each region sets the standards/taxes/quotas to maximize social welfare, (2) firms determine the abatement level, and (3) market competition occurs (firms determine output). We can use backward induction to solve this problem and guarantee the equilibrium solution concept is in perfect subgame equilibrium [48,49].…”

The Impact of Cross-Industry Pollution, Consumer Environmental Awareness, and Corporate Social Responsibility on Industrial Environmental Policies

“…Another type of impact that environmental policies have on the labor and job market was studied by Ulph (1996), Hoel (1997Hoel ( , 1998, Bárcena-Ruiz and Garzón (2003), Bárcena-Ruiz (2011), and Cheng et al (2019). Bárcena-Ruiz (2011) designed a dual-industry exclusive model with cross-sector pollution, which harms the labor productivity of other industries through environmental pollution, for example, loggers and delivery service personnel through the greenhouse effect, air pollution, and acid rain.…”

“…In this article, we follow the model setting of Bárcena-Ruiz (2011) andCheng et al (2019). The productivity of workers in different industries is believed to be different due to the externalities of pollution.…”