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Taxation within electricity auctions with dominant firm

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  • Francesco Gullì

Abstract

This paper gives an additional contribution to the literature on environmental policy under imperfect competition. It aims at exploring how imperfect competition can affect the performance of environmental policy. The focus is on pollution taxes and power generation which is a particularly interesting case for three reasons. First it is one of the most important environmentally regulated markets. Second the demand for electricity varies cyclically over time (for example on hourly basis). Third the pricing mechanism is a multi-period and multi-unit first price auctions. The main finding of the analysis is that, looking at the entire demand cycle, it is very unlikely (virtually impossible) that under imperfect competition taxation could increase emissions although, according to a part of the current literature, in principle pollution may increase in the short-run within specific cycle periods. Moreover this may happen under specific and unlikely conditions although, unlike what this literature suggests, large asymmetry of firms and extreme curvature of demand are not strictly necessary.

Suggested Citation

  • Francesco Gullì, 2012. "Taxation within electricity auctions with dominant firm," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 0(1), pages 95-120.
  • Handle: RePEc:fan:efeefe:v:html10.3280/efe2012-001007
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    More about this item

    Keywords

    Tassazione; emissioni; mercato elettrico;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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