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Environmental Regulation and the Eco-industry

  • Maia David
  • Bernard Sinclair-Desgagné

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. Cet article reconsidère la réglementation environnementale, sous l'hypothèse que les technologies et services de réduction de la pollution sont offerts par des entreprises spécialisées formant un oligopole. On y montre que chaque approche réglementaire (taxes et quotas sur les émissions polluantes, normes techniques, ou approches volontaires) a un impact particulier sur l'élasticité-prix de la demande de services en dépollution, donc sur le pouvoir de marché de l'éco-industrie et les coûts de réduction de la pollution. Ceci entraîne, entre autres, qu'une taxe optimale sur les émissions devrait être supérieure au coût marginal des dommages associés à celles-ci, tandis qu'une approche volontaire de réduction des émissions polluantes peut se révéler inopérante si les pratiques de marché de l'éco-industrie ne sont pas elles-mêmes correctement réglementées.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2004s-42.

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Length: 25 pages
Date of creation: 01 Sep 2004
Date of revision:
Handle: RePEc:cir:cirwor:2004s-42
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  1. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1995. " Environmental Policy under Oligopoly with Endogenous Market Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 411-20, September.
  2. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
  3. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
  4. Eberhard Feess & Gerd Muehlheusser, 2002. "Strategic Environmental Policy, Clean Technologies and the Learning Curve," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(2), pages 149-166, October.
  5. Innes, Robert & Bial, Joseph J, 2002. "Inducing Innovation in the Environmental Technology of Oligopolistic Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 265-87, September.
  6. Ngo Van Long & Antoine Soubeyran, 1998. "Pollution, Pigouvian Taxes, and Asymmetric International Oligopoly," CIRANO Working Papers 98s-30, CIRANO.
  7. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2013. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Economics Bulletin, AccessEcon, vol. 33(1), pages 747-752.
  8. Cadot Olivier & Sinclair-Desgagne Bernard, 1995. "Environmental Standards and Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 228-237, September.
  9. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
  10. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-41, December.
  11. Robert N. Stavins, 2007. "Environmental Economics," NBER Working Papers 13574, National Bureau of Economic Research, Inc.
  12. Carlo Carraro & Gilbert E. Metcalf, 2001. "Behavioral and Distributional Effects of Environmental Policy," NBER Books, National Bureau of Economic Research, Inc, number carr01-1, December.
  13. Carlo Carraro & Gilbert E. Metcalf, 2000. "Behavioral and Distributional Effects of Environmental Policy Introduction," NBER Working Papers 7648, National Bureau of Economic Research, Inc.
  14. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier.
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