Three Essays in Green Technology and Environmental Policy

This thesis comprises three essays on environmental economics and deals with issues such as corruption, emissions leakage and green alliances. Chapter 1 investigates the relationship between corruption and market entry. We show that corruption incentivises firms' entry in the market while an increased number of firms incentivises bureaucrats to be corrupt, in a self-reinforcing manner. Although the applicability of the model can be more general, we focus on the case of environmental regulation and show the positive relationship between corruption and pollution though market entry. In the second chapter, an additional factor which leads to emissions leakage is proposed. In a setting with two countries, when consumers in one country care only about domestic emissions, emissions leakage arises since demand for the good that is produced in that country using a greener technology is shifted abroad where production takes place with the dirtiest technology. Next, I consider the global environmental consciousness scenario i.e., consumers in that country now care about both the domestic and foreign emissions. In this case, foreign pollution is mitigated and leakage is diminished. In the last chapter, I examine green alliances, the partnerships between a firm and an environmental group. In this model, the environmentalists have two options: to either act against the firm which implies shrinking the demand that the firm faces or join forces with it by reducing the cost of implementing a greener technology. The group's decision is affected by an environmental tax set by the government and by extension it impacts firm's choices on output and emission intensity. It is shown that higher taxation makes the conflict scenario more likely to happen, implying that collaboration and a more stringent environmental policy are substitutes. This identifies a previously unexplored, possibly adverse effect of public policy on environmental quality.