Keywords: Cournot competition, NAFTA, pollution tariffs, uniform pollution tariff, North American Free Trade Agreement, environmental pollution, consumer welfare, economic integration
A Cournot competition model with the uniform pollution tariff: an application to NAFTA
This paper investigates the impact of a uniform pollution tariff on production, consumption and consumer welfare in the framework of the Cournot competition. It suggests that the uniform pollution tariff would raise the welfare of US consumers. However, it would penalise the higher-cost producer in the country where environmental regulations are more stringent. The policy implication is that economic integration, such as NAFTA, should take discriminatory pollution tariffs into consideration.