What is it about?
This article provides a theoretical explanation of the effect of environmental policy on two firms' essential decisions. First, investing in green technologies and, second, whwther to stay in the home country or relocating to a country with a softer environmental regulation. We consider two alternative policy instruments: an emission tax and a standard.
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Why is it important?
We conclude that, under certain conditions, taxes (as compared to standards) are more prone to induce firms to invest in gree technology. Therefore, if such investment is too costly, taxes may have the undesired effect of inducing firms to move to a pollution haven.
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This page is a summary of: Porter Hypothesis vs. Pollution Haven Hypothesis: Can an environmental policy generate a win–win solution?, Energy Economics, May 2025, Elsevier,
DOI: 10.1016/j.eneco.2025.108477.
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