Environmental Regulation: Supported by Polluting Firms but Opposed by Green Firms?
AbstractThis paper investigates the production decisions of polluting and green firms, and how their profits are affected by environmental regulation. We demonstrate that emission fees entail a negative effect on firms profits, since they increase unit production costs. However, fees can also produce a positive effect for a relatively inefficient firm, given that environmental regulation ameliorates its cost disadvantage. If such a disadvantage is sufficiently large, we show that the positive effect dominates, thus leading this firm to actually favor the introduction of environmental policy, while relatively efficient firms oppose regulation. Furthermore, we show that such support can not only originate from green firms but, more surprisingly, also from polluting companies.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150202.
Date of creation: 2013
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Environmental Economics and Policy; Industrial Organization; Research and Development/Tech Change/Emerging Technologies;
Other versions of this item:
- Felix Munoz-Garcia & Sherzod Akhundjanov, . "Environmental Regulation: Supported by Polluting Firms, but Opposed by Green Firms," Working Papers 2013-5, School of Economic Sciences, Washington State University.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
- NEP-ENV-2013-06-24 (Environmental Economics)
- NEP-RES-2013-06-24 (Resource Economics)
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