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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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  1. repec:hal:cesptp:hal-00675338 is not listed on IDEAS
  2. MAHENC Philippe, 2008. "Optimal environmental taxation when green alternative is available," LERNA Working Papers 08.04.248, LERNA, University of Toulouse.
  3. 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.
  4. Claude, Denis & Tidball, Mabel, 2006. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," MPRA Paper 776, University Library of Munich, Germany, revised 15 Oct 2006.
  5. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
  6. Francesco Gullì, 2011. "The interaction between emissions trading and energy and competition policies," RSCAS Working Papers 2011/20, European University Institute.
  7. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
  8. Chernyavs’ka, Liliya & Gullì, Francesco, 2007. "Interaction of carbon and electricity prices under imperfect competition," MPRA Paper 5866, University Library of Munich, Germany.
  9. 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.
  10. 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.

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