1. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. C H A P T E R 19 INTERNATIONAL AND INTERREGIONAL COMPETITION

2. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 19.1 Output with two emisson levels, E2 > E1. K, inputs of capital: L, inputs of labor; E, allowed emissions of pollution; Y, goods output.

3. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 19.2 (a,b) Value marginal product of capital (MP K ), two emisson levels (E 2 > E 1 ) and capital (K) as a function of the capital tax rate (t) and emission levels. K r T, amount of capital demanded with no tax on capital, emissions at E 2 ; K r+t, amount of capital demanded with tax t on capital, emissions at E 2.

4. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 19.3 Optimal levels of emissions (E) and per capita consumption (C) for different capital taxation rates (t). Equation (19.7) is feasible combinations of C and E. BD, feasible combinations of C,E with t = 0; OA, feasible combinations of C,E with t > 0; VW,RS, indifference curves for typical consumer; (E 0,L 0 ), efficient levels of E and C, t = 0; (E 1,C 1 ), efficient levels of E and C, t > 0.

5. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 19.4 Best response of domestic firm to foreign output levels.

6. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

7. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

8. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 19.7 Payoff to IEA and fringe members as a function of IEA site.