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Self-Financing Environmental Mechanisms

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Author Info
Joerg Breitscheidel ()
Hans Gersbach ()

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Abstract

We explore the design of self-financing tax/subsidy mechanisms to solve hold-up problems in environmental regulation. Under Cournot competition, announcing the subsidy rate seems to be preferable to announcing the tax rate. Moreover, for constant marginal damage the hold-up problem can always be solved by setting subsidies. Under Bertrand competition, only announcing the tax rate can induce at least one firm to invest. We suggest that feebate systems in the automotive sector should be designed as self-financing tax/subsidy mechanisms.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1528.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1528

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Related research
Keywords: hold-up problems environmental regulation taxes and subsidies self-financing mechanisms emission control

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D62 - Microeconomics - - Welfare Economics - - - Externalities
L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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References listed on IDEAS
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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  5. Hans Gersbach, 2002. "How to get firms to invest: A simple solution to the hold-up problem in regulation," Review of Economic Design, Springer, vol. 7(1), pages 45-56. [Downloadable!] (restricted)
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  16. Richard J. Gilbert & David M. Newbery, 1994. "The Dynamic Efficiency of Regulatory Constitutions," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 538-554, Winter. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Breitscheidel, Jörg, 2005. "Self-financing Tax/Subsidy Mechanisms in Environmental Regulation with Many Firms," ZEW Discussion Papers 05-87, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Breitscheidel, Jörg, 2005. "Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation," ZEW Discussion Papers 05-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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This page was last updated on 2008-9-22.


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