There is a wide range of countries which have employed local content
requirements to promote jobs and meet national green energy objectives. At the same
time market-based policies (e.g., emission taxes) have been implemented to address
environmental degradation. This paper considers a Cournot model in the presence of
emission taxes and local content requirements where the number of foreign, more efficient
firms, is endogenous. The analysis explores conditions under which an emission
tax and/or local content may lower emissions and encourage foreign direct investment.
The analysis of policy reform is also explored.
