Abstract
This paper examines whether governments should adopt stricter environmental policies—such as raising environmental taxes—in closed and open economies. It reconsidered the policy effects of enterprise heterogeneity in an open economy and studied the relationship between environmental policies and sustainable development. In the case of self-sufficiency, it is possible to replace punitive environmental policies with environmental subsidies, which is beneficial to sustainable development. However, when trade is opened up, as less productive enterprises withdraw from local and export markets, the stricter environmental policy is the optimal strategy for environmental and energy sustainable development.
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Notes
The technology of the heterogeneous goods will be described in “Firms’ behavior.”
It is assumed the marginal damage in both countries are identical and follows a purely regional externality.
For a firm i, a lower index i means a higher productivity.
Melitz (2003) supposes the firm heterogeneity is from the marginal cost and not the fixed cost.
Following by the quasi-linear cost function, the productivity index of the highest productivity firm is i = 0
This additional cost can be treated as a document cost for exporting strategies and is a fixed constant.
The last term of (20) is equal to zero because of\( {\displaystyle \begin{array}{l}\partial {\int}_0^{i_d}\pi (i) di/\partial t=\frac{\mu {t}^{\gamma \left(1-\varepsilon \right)}{i}_d}{\varepsilon p}{\left(\frac{A}{\alpha}\right)}^{1-\varepsilon}\left[\frac{\gamma \left(1-\varepsilon \right)}{t}-\frac{1}{p}\frac{\partial p}{\partial t}\right]=0.\\ {}\kern2.04em \end{array}} \)
To derive our results and simplify our analysis, it is assumed that the strategic interaction between the two governments is omitted, and it means that ∂tj/∂tk = 0.
\( \frac{\partial {p}_k}{\partial {t}_k}=\frac{\gamma \left(1-\varepsilon \right){A}^{1-\varepsilon }{\alpha}^{\varepsilon -1}{t}_k^{\gamma \left(1-\varepsilon \right)-1}\left({i}_{kd}+\frac{f\left({i}_{kd}\right)}{f^{\prime}\left({i}_{kd}\right)}\right)}{\left[1+{A}^{1-\varepsilon }{\alpha}^{\varepsilon -1}{p}_k\left({t}_k^{\gamma \left(1-\varepsilon \right)}\frac{f\left({i}_{kd}\right)}{f^{\prime}\left({i}_{kd}\right)}+{\left(\tau {t}_j^{\gamma}\right)}^{1-\varepsilon}\frac{f\left({i}_{jx}\right)}{f^{\prime}\left({i}_{jx}\right)}\right)\right]}<0. \)
For simplicity, we do not include the export profit for measuring the representative consumer’s income and only add the profit from the domestic firms into the income.
ChinaFAQs: China’s Energy Conservation Accomplishments of the 11th Five-Year Plan, ChinaFAQs on Jul 25, 2011.
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Yang, J., Chen, ML., Fu, CY. et al. Environmental policy, tax, and the target of sustainable development. Environ Sci Pollut Res 27, 12889–12898 (2020). https://doi.org/10.1007/s11356-019-05191-1
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DOI: https://doi.org/10.1007/s11356-019-05191-1