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Energy Tax and Competition in Energy Efficiency: The Case of Consumer Durables

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  • K. Conrad

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Abstract

The purpose of this paper is to analyze the role of anenergy tax on technical improvements and on prices ofconsumer durables induced by strategic competition inenergy efficiency. If the gasoline tax is raised thisdoes in principle not affect the producers of carsbecause the motorist pays for it in terms of a highercost of using the car. This, however, affects the unitsales of car producers because of substitution towardsother modes of transportation. A second element ofreaction to energy price variation is an indirect oneand relates to the effect of energy prices ontechnology. Competition forces car producers todevelop more energy efficient cars in order to reducethe cost of using a car. This indirect effect canpartly offset the direct effect of higher energyprices on demand if it is profitable for theautomobile industry to engineer more energy efficientequipment. We will analyze the impact of an energy taxon energy efficiency and on the price of a durablegood. This will be done within the framework of aduopoly competing in prices and in the energyefficiency of its products. The government chooses awelfare maximizing energy tax as an incentive toinnovate. Then we will analyze a strategic two-stagedecision process in which the duopolists first decideabout energy efficiency and then compete in prices. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • K. Conrad, 2000. "Energy Tax and Competition in Energy Efficiency: The Case of Consumer Durables," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 159-177, February.
  • Handle: RePEc:kap:enreec:v:15:y:2000:i:2:p:159-177
    DOI: 10.1023/A:1008362416293
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    References listed on IDEAS

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    1. Conrad, Klaus & Wang, Jianmin, 1993. "The effect of emission taxes and abatement subsidies on market structure," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 499-518.
    2. Edward Calthrop & Stef Proost, 1998. "Road Transport Externalities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 335-348, April.
    3. Lee, Dwight R., 1975. "Efficiency of pollution taxation and market structure," Journal of Environmental Economics and Management, Elsevier, vol. 2(1), pages 69-72, September.
    4. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
    5. I.O. Walker & Franz Wirl, 1993. "Irreversible Price-Induced Efficiency Improvements: Theory and Empirical Application to Road Transportation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 183-205.
    6. Conrad, Klaus, 1983. "Cost prices and partially fixed factor proportions in energy substitution," European Economic Review, Elsevier, vol. 21(3), pages 299-312, May.
    7. Magat, Wesley A., 1978. "Pollution control and technological advance: A dynamic model of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 1-25, March.
    8. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    9. Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
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    Cited by:

    1. Galarraga, Ibon & Abadie, Luis M. & Ansuategi, Alberto, 2013. "Efficiency, effectiveness and implementation feasibility of energy efficiency rebates: The “Renove” plan in Spain," Energy Economics, Elsevier, vol. 40(S1), pages 98-107.
    2. Ahmed, Rasha & Segerson, Kathleen, 2011. "Collective voluntary agreements to eliminate polluting products," Resource and Energy Economics, Elsevier, vol. 33(3), pages 572-588, September.
    3. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
    4. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
    5. repec:eee:resene:v:49:y:2017:i:c:p:132-149 is not listed on IDEAS

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