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Environmental Regulation and the Eco-industry

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Author Info
Maia David
Bernard Sinclair-Desgagné ()

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Abstract

This paper re-examines environmental regulation, under the assumption that pollution abatement technologies and services are provided by an imperfectly competitive environment industry. It is shown that each regulatory instrument (emission taxes and quotas; design standards; and voluntary agreements) has a specific impact on the price-elasticity of the polluters’ demand for abatement services, hence on the market power of the eco-industry and the resulting cost of abatement. This implies that the optimal pollution tax will be higher than the marginal cost of pollution damage, while a voluntary approach to pollution abatement may fail unless the eco-industry itself is properly regulated.

Cet article reconsidère la réglementation environnementale, sous l'hypothèse que les technologies et services de réduction de la pollution sont offerts par des entreprises spécialisées formant un oligopole. On y montre que chaque approche réglementaire (taxes et quotas sur les émissions polluantes, normes techniques, ou approches volontaires) a un impact particulier sur l'élasticité-prix de la demande de services en dépollution, donc sur le pouvoir de marché de l'éco-industrie et les coûts de réduction de la pollution. Ceci entraîne, entre autres, qu'une taxe optimale sur les émissions devrait être supérieure au coût marginal des dommages associés à celles-ci, tandis qu'une approche volontaire de réduction des émissions polluantes peut se révéler inopérante si les pratiques de marché de l'éco-industrie ne sont pas elles-mêmes correctement réglementées.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2004s-42.

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Date of creation: 01 Sep 2004
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Handle: RePEc:cir:cirwor:2004s-42

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Related research
Keywords: pollution regulation; end-of-pipe pollution abatement; environment industry; régulation de la pollution; réduction en bout de chaîne de la pollution; industries environnementales;

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Find related papers by JEL classification:
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
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: 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.:
  1. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2005. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Working Papers hal-00243020_v1, HAL. [Downloadable!]
    Other versions:
  2. Ngo Van Long & Antoine Soubeyran, 1998. "Pollution, Pigouvian Taxes, and Asymmetric International Oligopoly," CIRANO Working Papers 98s-30, CIRANO. [Downloadable!]
  3. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future. [Downloadable!]
    Other versions:
  4. Carlo Carraro & Gilbert E. Metcalf, 2000. "Behavioral and Distributional Effects of Environmental Policy: Introduction," Discussion Papers Series, Department of Economics, Tufts University 0011, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  5. Innes, Robert & Bial, Joseph J, 2002. "Inducing Innovation in the Environmental Technology of Oligopolistic Firms," Journal of Industrial Economics, Blackwell Publishing, vol. 50(3), pages 265-87, September. [Downloadable!] (restricted)
  6. Eberhard Feess & Gerd Muehlheusser, 2002. "Strategic Environmental Policy, Clean Technologies and the Learning Curve," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(2), pages 149-166, October. [Downloadable!] (restricted)
  7. Adam B. Jaffe & Richard G. Newell & Robert N. Stavins, 2000. "Technological Change and the Environment," NBER Working Papers 7970, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March. [Downloadable!] (restricted)
  9. Cadot Olivier & Sinclair-Desgagne Bernard, 1995. "Environmental Standards and Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 228-237, September. [Downloadable!] (restricted)
  10. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December. [Downloadable!] (restricted)
  11. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier. [Downloadable!] (restricted)
  12. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(3), pages 411-20, September.
    Other versions:
Full references

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. Requate, Till, 2005. "Environmental Policy under Imperfect Competition : A Survey," Economics Working Papers 2005,12, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
  2. Canton, Joan & David, Maia & Sinclair-Desgagne, Bernard, 2008. "Environmental regulation and horizontal mergers in the eco-industry," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44456, European Association of Agricultural Economists. [Downloadable!]
    Other versions:
  3. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2005. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Working Papers hal-00243020_v1, HAL. [Downloadable!]
    Other versions:
  4. Walid Marrouch & Bernard Sinclair-Desgagné, 2008. "Regulating Man-Made Sedimentation in Riverways," CIRANO Working Papers 2008s-04, CIRANO. [Downloadable!]
  5. Joan Canton, 2007. "Redealing the Cards: How the Presence of an Eco-Industry Modifies the Political Economy of Environmental Policies," Working Papers 2007.25, Fondazione Eni Enrico Mattei. [Downloadable!]
  6. Joan Canton, 2007. "Environmental Taxation and International Eco-Industries," Working Papers 2007.26, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Gerda Dewit & Dermot Leahy, 2008. "Tax uniformity: A commitment device for restraining opportunistic behaviour," Economics, Finance and Accounting Department Working Paper Series n1971108.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  8. Grischa Perino, 2008. "The Design of Permit Schemes and Environmental Innovation," Working Papers 0467, University of Heidelberg, Department of Economics, revised Jun 2008. [Downloadable!]
  9. Maia David & Bernard Sinclair-Desgagné, 2007. "Revisiting the environmental subsidy in the presence of an eco-industry," Working Papers hal-00243054_v1, HAL. [Downloadable!]
  10. Joan Canton & Antoine Soubeyran & Hubert Stahn, 2008. "Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(3), pages 369-382, July. [Downloadable!] (restricted)
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