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Environmental Regulation and the Eco-Industry

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  • Maia David
  • Bernard Sinclair-Desgagné

Abstract

This paper re-examines environmental regulation, under the assumption that pollution abatement technologies and services are provided by an imperfectly competitive environment industry. It is shown that each regulatory instrument (emission taxes and quotas; design standards; and voluntary agreements) has a specific impact on the price-elasticity of the polluters’ demand for abatement services, hence on the market power of the eco-industry and the resulting cost of abatement. This implies that the optimal pollution tax will be higher than the marginal cost of pollution damage, while a voluntary approach to pollution abatement may fail unless the eco-industry itself is properly regulated.

Suggested Citation

  • Maia David & Bernard Sinclair-Desgagné, 2004. "Environmental Regulation and the Eco-Industry," Working Papers 2004/06, INRA, Economie Publique.
  • Handle: RePEc:apu:wpaper:2004/06
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Pollution regulation; End-of-pipe pollution abatement; Environment industry;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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