Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 742: Fiscal Federalism, Interjurisdictional Externalities and Overlapping Policies
Jessica Coria (), Magnus Hennlock () and Thomas Sterner ()
Additional contact information
Jessica Coria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Magnus Hennlock: Swedish Environmental Research Institute (IVL),
Abstract: In this paper, we analyze the effects of the interaction between national and local policies designed to reduce an environmental externality that causes environmental damages both nationally and locally. We formulate a theoretical model to develop hypotheses regarding the combined effects of such policies on the stringency of the local policies and on firms’ emissions reductions. To test our hypotheses, we use actual data for Sweden, where emissions of nitrogen oxides from combustion plants are subject to a heavy national tax and to individual emissions standards set by county authorities. Our analytical findings suggest that it is unlikely that local regulators will impose emissions standards stringent enough to achieve further reductions than those induced by the national tax. This is confirmed in our data, where most emissions reductions can be attributed to the national tax and the effects of the emissions standards are not significant.
Keywords: environmental regulation; multi-governance; federalism; emission taxes; command-and-control; air pollution; N0x; Sweden
35 pages, September 2018
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