Environmental Regulation: Supported by Polluting Firms, but Opposed by Green Firms
AbstractThis paper investigates the production decisions of polluting and green fi?rms, and how their profi?ts are affected by environmental regulation. We demonstrate that emission fees entail a negative effect on fi?rms? profi?ts, 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 fi?rms 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 School of Economic Sciences, Washington State University in its series Working Papers with number 2013-5.
Length: 33 pages
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Cost asymmetries; Cost disadvantage; Emission fees; Green firms;
Other versions of this item:
- Akhundjanov, Sherzod & Munoz-Garcia, Felix, 2013. "Environmental Regulation: Supported by Polluting Firms but Opposed by Green Firms?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150202, Agricultural and Applied Economics Association.
- 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-2013-08-10 (All new papers)
- NEP-CDM-2013-08-10 (Collective Decision-Making)
- NEP-ENE-2013-08-10 (Energy Economics)
- NEP-ENV-2013-08-10 (Environmental Economics)
- NEP-REG-2013-08-10 (Regulation)
- NEP-RES-2013-08-10 (Resource Economics)
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