ABSTRACT
This chapter introduces the model, and presents optimal pollution quotas under non-cooperative, cooperative and uniform scenarios. It also introduces comparative statistics for specific parameters. The chapter aims to observe the impact of asymmetric technology levels on the optimal environmental policies and welfare for non-cooperative and cooperative solutions. The literature on environmental regulations and technology has very important studies, most of which take the technology level as endogenous and thus see the impact of regulations on the change of technology level. Environmental regulations can affect the market structure by changing the cost of production. The chapter examines the optimal environmental standards under the asymmetry in abatement technology. It develops a two-country intra-industry trade model with one domestic firm in each country. Firms are assumed to compete in Cournot-Nash fashion and they serve both domestic and foreign markets.
