The high rates of economic activity and environmental degradation in Asia demand the implementation of creative and cost-effective environmental policy instruments that provide polluters with more flexibility to find least-cost solutions to pollution reduction. Despite their many theoretical advantages, the use of market-based instruments (MBIs) is a relatively recent phenomenon in Asia, partly due to policymakers being unfamiliar with MBIs and countries lacking the institutional capacity to implement and enforce them.

This paper investigates the optimal quota/tariff polices for China and India, two of the biggest developing countries who are facing the threat of possible oil supply disruptions, with taking into their possible interactions in the common world oil market. Our results indicate that the smaller (oil-importing) country may have higher incentive to free ride on the quota/tariff policy of the larger country. Besides, the optimal tariffs for the two countries would be larger in the cooperative case than those in the non-cooperative case.

Abstract: We compare of  the  performance  of  emission  taxes  between  Colombia  and  Sweden in an experimental  setting  where  subjects are regulated  through  environmental  taxes  and  had  to decide on emission levels, compliance behavior, and adoption of an environmentally friendly technology.  Our  design  allows  us  to  analyze  the  role of variations  in  the  stringency  of  the policy  enforcement&nbsp