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Optimal Taxation Rule Reversal in the Presence of Gentle Polluters and Greedy Cleaners

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  • Damien Sans

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The literature on the micro-economics of the eco-industry often assumed interiority of pollutant net emissions. In a perfectly competitive final good market vertically integrated with an upstream monopoly supply this assumption implies that an optimal tax is always greater than its associated marginal social damage. In this short note we will relax this assumption and challenge that result. The market structure generates a unique threshold on the scale of the marginal social damage, whereby for any value above the threshold an optimal tax is strictly lower and net emissions are zero.

Suggested Citation

  • Damien Sans, 2015. "Optimal Taxation Rule Reversal in the Presence of Gentle Polluters and Greedy Cleaners," Working Papers halshs-01247190, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01247190
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01247190
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    References listed on IDEAS

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    1. Sonia Schwartz & Hubert Stahn, 2014. "Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 69-95, February.
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    14. repec:adr:anecst:y:2011:i:103-104:p:02 is not listed on IDEAS
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    More about this item

    Keywords

    microeconomics; eco-industry; imperfect competition; optimal taxation;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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