Pollution and Commerce Control between Emerging Countries
Salvador Sandoval Bravo *
University of Guadalajara, University Center of Economic and Administrative Sciences (CUCEA), Department of Quantitative Methods, Module M2do, Nivel, Periférico Norte799, Núcleo Universitario Los Belenes, C.P.45100, Zapopan, Jalisco, México.
Semei Coronado Ramirez
University of Guadalajara, University Center of Economic and Administrative Sciences (CUCEA), Department of Quantitative Methods, Module M2do, Nivel, Periférico Norte799, Núcleo Universitario Los Belenes, C.P.45100, Zapopan, Jalisco, México.
*Author to whom correspondence should be addressed.
Abstract
This work presents a mathematical model for reciprocal dumping and transboundary pollution, under a setting of oligopolistic competition. To control emissions, governments can establish two environmental regulation instruments: quotas and taxes. To do so, they calculate the optimal values for these variables and implement environmental policies, which aim to maximize the welfare function for both consumers and manufacturing companies and improve tax revenue and the social cost of polluting. With this model, we are able to conclude that when the social cost of polluting is high, governments should impose a quota for the level of pollution or a tax for contaminating. However, if the cost to abate pollution is high, the government may increase the pollution quota or reduce the tax.
Keywords: Optimaltax, optimalquota, reciprocal dumping, transboundary and pollution