Industrial Garbage Tax and Environmental Policy Game under a Two-Region Model

Abstract

This study is intended to examine an efficient industrial garbage disposal system and an optimal policy to establish it. Industrial waste created in processes of all production is increasing every year. That increase is exacerbated by the shortage of disposal space, engendering frequent cases of illegal abandonment. We analyze environmental policies to restrain illegal abandonment and to establish a social optimum under the two-region model that incorporates transboundary movements of industrial garbage. Although a subsidy policy is an optimal policy in the one-region model, it is not optimal policy in the two-region model because of a subsidy-reducing game.