Regulating a Polluting Oligopoly: Emission Tax or Voluntary Agreement?
AbstractThis paper compares, in a polluting oligopoly, an emission tax and a form of environmental policy called voluntary agreement (VA). Here there are two ways of reducing pollution: output contraction and end-of-pipe abatement. Given the imperfect competition, firms' reaction to the tax is sub-optimal. They reduce output excessively in order to raise the price and do not abate enough. The VA is a take-it-or-leave-it contract on abatement effort, offered to the firms with the threat of a tax. It has a limited effect on output and always allows higher abatement than the tax. We find that this kind of VA may be more efficient than the tax in a concentrated industry, when pollution is not too harmful and when the abatement technology is rather efficient and cheap. Copyright Blackwell Publishing Ltd 2005.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 9 (2005)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
Other versions of this item:
- Maia David, 2004. "Regulating a Polluting Oligopoly: Emission Tax or Voluntary Agreement?," Working Papers 2004/07, INRA, Economie Publique.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Farzin, Y H & Kort, P M, 2000.
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Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 2(2), pages 183-212.
- Kort, P.M. & Farzin, Y.H., 2000. "Pollution abatement investment when environmental regulation is uncertain," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84064, Tilburg University.
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