Emission taxes and the market for abatement goods and services
AbstractThis paper examines the effect of emission taxes on pollution abatement and social welfare, when abatement goods and services are provided by a Cournot oligopoly with free-entry. We point out initially that a higher tax not only increases demand for abatement; it also makes polluters less sensitive to price. This attracts a larger number of abatement suppliers while possibly inducing each one of them to produce less. Total abatement always goes up, however, when the delivery of abatement goods and services exhibits decreasing returns to scale. We then calculate the welfare-maximizing emission tax and compare it to the Pigouvian tax.
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Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505569
Eco-industry Free-entry oligopoly Endogenous market structure Emission tax;
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