Trade, Transboundary Pollution, and Foreign Lobbying

Abstract

Recent events have fueled the discussion of the susceptibility of government policies to lobbying by foreigners. In this paper, we consider the role of foreign lobbying in determining trade and environmental regulations. In particular, we develop a differential game to examine the effects of foreign lobbying on the solutions for transboundary pollution stock control involving two trading countries linked by trade flows. Our analysis suggests that the success of trade policy as an instrument for enforcing cooperation and internalizing externalities depends critically on the degree of governments' corruptibility and susceptibility to international political influence. The model explores optimal pollution regulation strategies, the evolution and equilibrium level of pollution stock, and welfare implications under two different scenarios: in the presence and in the absence of foreign lobbying. Comparison of the outcomes of these scenarios shows that foreign lobbying may lead to a less stringent regulation of the transboundary pollution externality and to degradation of environmental quality.2

Aggregate emission intensity targets: Applications to the Paris Agreement

“…The static modeling approach adopted in the paper can be extended in several directions. First, since GHGs are stock pollutants, current emissions have implications for optimal emissions in the future, and the dynamic interactions are even more important when incorporating the facts that the pollutants are transboundary and nations are playing a dynamic game (Mason et al, 2017(Mason et al, , 2018. Given that the commitments in the Paris Agreement are long term, it is desirable to analyze aggregate target paths where the type of the target (e.g., intensity or quantity targets) can change over time.…”

Regulation aspects of development and the use of energy resources in the transboundary zones by international business

“…Earle and Neal (2017) make a point at a comprehensive scientific study of issues relating to the legal regime of natural resources that are located in territories with different legal status. Mason et al (2017) explores various aspects of cross-border cooperation, namely: ecological, socioecological, economic and legal aspects. For the sustainable management and monitoring of the use of transboundary resources, providing an effective mechanism for cross-border cooperation is necessary (Mason et al 2020).…”

Transboundary Externalities and Reciprocal Taxes: A Differential Game Approach

“…This literature typically neglects the potential for a trade relationship among the countries involved in the transboundary pollution stock control. Notable exceptions include Fernandez (2002), who explores empirically dynamic solutions to transboundary pollution through trade liberalization and environmental institutions for multilateral pollution control, Cabo et al (2001), who analyzed strategies that lead to a self-enforcing agreement on transboundary pollution problem within a North-South framework, and Cabo et al (2006), who study a model similar to ours, but with fixed output levels, Mason et al (2015), who focus on the use of a feed-in tariff by the importing country, and Mason et al (2017), who study the potential for the upstream country to lobby the downstream government to lower the import tariff. None of these papers explore the potential use of a climate-based strategy by the exporting country, such as a carbon tax, to blunt the effect of the importing country's strategy.…”