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Optimal overall emissions taxation in durable goods oligopoly

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  • Sagasta Elorza, Amagoia
  • Usategui Díaz de Otalora, José María

Abstract

We analyze optimal second-best emission taxes in a durable good industry under imperfect competition. The analysis is performed for three different types of emissions and for situations where the good is rented, sold or simultaneously sold and rented. We show, for durable goods that may cause pollution in a period (or in periods) different from the production period, that the expected overall emission tax and the expected total marginal environmental damage per unit produced in each period are the relevant variables to consider in the analysis of overinternalization and in the comparison of optimal emission taxes for renting, selling and renting-selling firms. Our results allow to extend some previous results in the literature to these durable goods and provide an adequate perspective on some other results (in particular, we point out the limitations of focusing only, for those durable goods, on the level and effects of the optimal emission tax in the production period).

Suggested Citation

  • Sagasta Elorza, Amagoia & Usategui Díaz de Otalora, José María, 2012. "Optimal overall emissions taxation in durable goods oligopoly," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:9178
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    Keywords

    optimal emission taxes; durable good; overinternalization; emission types; imperfect competition;
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