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Firm Preferences for Environmental Policy: Industry Uniform or Firm Specific?

Author

Listed:
  • Felix Munoz-Garcia
  • Sherzod B. Akhundjanov

    (School of Economic Sciences, Washington State University)

Abstract

This paper examines the e ect of uniform and non-uniform environmental regulation on the production decisions, and profits, of polluting and green firms. While both types of regulation increase firms' costs and thus entail a negative effect on profits, non-uniform regulation can also yield a positive effect for relatively inefficient firms by alleviating their cost disadvantage. When such cost disadvantage is sufficiently large, we show that the positive effect of nonuniform regulation dominates its negative effect, leading inefficient (efficient) firms to support (oppose) socially optimal regulation. Furthermore, our findings indicate that such support for environmental policy can originate not only from the most common ally (the green firm) but also from polluting firms as non-uniform regulation could help them alleviate their cost disadvantage.

Suggested Citation

  • Felix Munoz-Garcia & Sherzod B. Akhundjanov, 2014. "Firm Preferences for Environmental Policy: Industry Uniform or Firm Specific?," Working Papers 2014-8, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:munoz-15
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    References listed on IDEAS

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    More about this item

    Keywords

    Cost asymmetry; cost disadvantage; emission fees; green firms.;
    All these keywords.

    JEL classification:

    • 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
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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