This paper considers a trade situation where the production activities of potentially heterogeneous countries generate pollution which can cross borders and harm the well-being of all the countries involved. In each of those countries the policy market levies pollution taxes on the polluting...

In this paper, we explore automobile fuel efficiency policies in the presence of two externalities i) a global environmental problem; and ii) international innovation spillovers. Using a simple model with two regions, we show that both a fuel tax and a tax on vehicles based on their fuel economy...