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Polution linked to consumption: a study of policy instruments in an environmental differentiated oligopoly

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  • Moraga-González, José Luis
  • Padrón Fumero, Noemi

Abstract

In this paper we evaluate tlle effeetiveness of alternative regulatory policies on redueing aggregate pollution in an environmental1y differentiated market. Two frrms frrst ehoose their environmental quality and then their priees in a market where eonsumers differ in their valuations of the environmental features of the produets. We frrst show that environmental standards may have an adverse impaet on aggregate pollution. Moreover, we fmd that a uniform ad-valorem tax rate unambiguously increases the level of pollution in the market. When the tax rate is set in favor of the environmentally eleaner produet, aggregate pollution deereases. Finally, direet subsidies on the abatement technology always decrease pollution.

Suggested Citation

  • Moraga-González, José Luis & Padrón Fumero, Noemi, 1996. "Polution linked to consumption: a study of policy instruments in an environmental differentiated oligopoly," UC3M Working papers. Economics 4134, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:4134
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