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We study the coordination of environmental policy within an agreement in the context of international trade. In an n-country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments choose strategically an emission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to allow for some form of policy coordination, though full cooperation will never be obtained.
© 2018 M. Finus and A. Al Khourdajie
2018
Emerald Publishing Limited
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