This paper examines several policy regimes to deal with the problem that households suffer from environmental damage by firms in the same region. Taxation gives firms and households an incentive to stay away from each other. Laissez faire (compensation) only gives households (firms) an incentive...

Trade liberalization in environmental goods is high on the agenda of the current Doha round. We examine its effects in a model with one domestic downstream polluting firm and two upstream firms (one domestic, one foreign). The domestic government sets the emission tax rate after the outcome of...