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Environmental Policy under Imperfect Competition : A Survey

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  • Requate, Till

Abstract

In this article I survey the theoretical literature on environmental policy in the presence of imperfect competition, ranging from early contributions in the 1960s to the present. I cover the following market structures when polluting firms have market power in the output market: monopoly, Cournot oligopoly, Bertrand duopoly with homogeneous products, pricesetting duopoly with differentiating commodities, and models of monopolistic competition. Among the latter I consider Cournot oligopoly with free entry, the Dixit-Stiglitz model, and Salop?s model of the circular city with polluting firms. The regulation instruments I concentrate on are emission taxes, tradable permits, and both absolute and relative standards. I also discuss taxation when firms have market power in the input market, and I study models where firms exercise market power in the market of tradable permits. In the latter case I also survey some recent results from the literature on experimental economics. Finally, I briefly discuss environmental policy in open economies when firms have market power in international markets. Here I suggest different decompositions of the unilateral second-best optimal tax rate, thus attempting to unify alternative interpretations of these decompositions in the literature. --

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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2005,12.

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Date of creation: 2005
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Handle: RePEc:zbw:cauewp:3198

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Cited by:
  1. Chernyavs’ka, Liliya & Gullì, Francesco, 2007. "Interaction of carbon and electricity prices under imperfect competition," MPRA Paper 5866, University Library of Munich, Germany.
  2. David F. Drake, 2011. "Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions," Harvard Business School Working Papers 12-029, Harvard Business School.
  3. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
  4. Francesco Gullì, 2011. "The interaction between emissions trading and energy and competition policies," RSCAS Working Papers 2011/20, European University Institute.
  5. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
  6. MAHENC Philippe, 2008. "Optimal environmental taxation when green alternative is available," LERNA Working Papers 08.04.248, LERNA, University of Toulouse.
  7. Bonacina, Monica & Gulli`, Francesco, 2007. "Electricity pricing under "carbon emissions trading": A dominant firm with competitive fringe model," Energy Policy, Elsevier, vol. 35(8), pages 4200-4220, August.
  8. Clemens Heuson, 2010. "Weitzman Revisited: Emission Standards Versus Taxes with Uncertain Abatement Costs and Market Power of Polluting Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(3), pages 349-369, November.

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