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Self-Financing Environmental Mechanisms

Author

Listed:
  • Joerg Breitscheidel
  • Hans Gersbach

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.

Suggested Citation

  • Joerg Breitscheidel & Hans Gersbach, 2005. "Self-Financing Environmental Mechanisms," CESifo Working Paper Series 1528, CESifo.
    • Handle: RePEc:ces:ceswps:_1528
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1528.pdf
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    References listed on IDEAS

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    Cited by:

    1. Breitscheidel, Jörg, 2005. "Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation," ZEW Discussion Papers 05-86, ZEW - Leibniz Centre for European Economic Research.
    2. Kai Konrad & Stergios Skaperdas, 2012. "The market for protection and the origin of the state," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 417-443, June.
    3. Breitscheidel, Jörg, 2005. "Self-financing Tax/Subsidy Mechanisms in Environmental Regulation with Many Firms," ZEW Discussion Papers 05-87, ZEW - Leibniz Centre for European Economic Research.

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    Keywords

    hold-up problems; environmental regulation; taxes and subsidies; self-financing mechanisms; emission control;
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