We incorporate the process of policy diffusion (i.e. the uncoordinated dissemination of policies among countries) into a probabilistic two-country-model of strategic environmental policy. Contrary to the usual setting with simultaneous decision making we consider the impact of sequential...

In dealing with a transnational pollutant-emitting duopoly welfare-maximising policy makers face two negative externalities: imperfect competition and unpriced emissions. Strategic environmental policy models show that these externalities involve a trade-off between reducing pollution and...