Competing firms, competing regulators: The strategic cost of fragmented climate policy

Economics > General Economics [Submitted on 15 Jun 2026] Title:Competing firms, competing regulators: The strategic cost of fragmented climate policy View PDF HTML (experimental)Abstract:Climate policy in global network industries is implemented across fragmented jurisdictions, yet firms respond through integrated operational networks. We develop a two-stage game-theoretic framework to analyze how firm-level responses interact with alternative governance structures. Regulators first choose emissions charges. Firms subsequently compete through pricing, service capacity and capital deployment decisions. The analytical results demonstrate that uniform global regulation maximizes welfare in symmetric markets. However, in sufficiently asymmetric markets, a uniform global charge is dominated by decentralized regimes. Multiple regulatory instruments better accommodate region-specific market externalities. We apply this framework to a calibrated case study of North American, Western European and transatlantic aviation markets. The numerical results establish that a globally coordinated regulator setting region-specific charges achieves the highest aggregate welfare. These aggregate gains nonetheless mask substantial distributional disparities across jurisdictions. Effective climate governance in network industries therefore requires more than determining an efficient emissions charge. Policy instruments ought to accommodate regional heterogeneity and transfer mechanisms will be necessary to ensure efficient, politically stable cooperation. Submission history From: Gianmarco Andreana [view email][v1] Mon, 15 Jun 2026 20:55:11 UTC (135 KB) Current browse context: econ.GN References & Citations Loading... Bibliographic and Citation Tools Bibliographic Explorer (What is the Explorer?) Connected Papers (What is Connected Papers?) Litmaps (What is Litmaps?) scite Smart Citations (What are Smart Citations?) Code, Data and Media Associated with this Article alphaXiv (What is alphaXiv?) CatalyzeX Code Finder for Papers (What is CatalyzeX?) DagsHub (What is DagsHub?) Gotit.pub (What is GotitPub?) Hugging Face (What is Huggingface?) ScienceCast (What is ScienceCast?) Demos Recommenders and Search Tools Influence Flower (What are Influence Flowers?) CORE Recommender (What is CORE?) arXivLabs: experimental projects with community collaborators arXivLabs is a framework that allows collaborators to develop and share new arXiv features directly on our website. Both individuals and organizations that work with arXivLabs have embraced and accepted our values of openness, community, excellence, and user data privacy. arXiv is committed to these values and only works with partners that adhere to them. Have an idea for a project that will add value for arXiv's community? Learn more about arXivLabs.