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Self-Imposed Carbon Taxes

Author

Listed:
  • Guillermo Marshall
  • Alvaro Parra

    (University of British Columbia, Sauder School of Business
    Dalhousie University, Department of Economics)

Abstract

Why have firms chosen to self-impose a carbon tax where governments have failed to act? We provide an answer to this question by highlighting a novel mechanism in which a firm can use a self-imposed carbon tax to relax the intensity of price competition with its rivals, making it a profitable strategy. The mechanism we highlight does not depend on the self-imposed carbon tax shifting demand or yielding marketing benefits (e.g., making the firm’s products more attractive to consumers because they are considered “green†). We discuss implications for market efficiency and the interaction of this mechanism with opportunities to invest in emission abatement technology.

Suggested Citation

  • Guillermo Marshall & Alvaro Parra, 2026. "Self-Imposed Carbon Taxes," Working Papers daleconwp2026-03, Dalhousie University, Department of Economics.
    • Handle: RePEc:dal:wpaper:daleconwp2026-03
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