ABSTRACT
This chapter explores changes in both production costs and pollution abatement costs via policy reform and how these may alter optimal emission taxes, with particular attention to the effects on global emissions. The present analysis contributes to an important branch of the literature which examines the policy reform of reducing emissions under imperfect competition, particularly the role of environmental standards and emission taxes. The chapter discusses some of limitations of the analysis and suggesting questions for future research. In this type of analytical framework the effect of taxes has been examined in literature and makes a few remarks. It builds a two-country model where firms compete in a Cournot fashion, face an emission tax and exhibit heterogeneous abatement costs. The chapter analysis of policy reform is presented, particularly its impact on global emissions. It shows that asymmetries in abatement and production costs play a crucial role in the extent to which global emissions fall via unilateral and multilateral policy reform.
