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Emission taxes and the market for abatement goods and services

Author

Listed:
  • Maia David

    (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)

  • Alain-Désiré Nimubona

    (Department of Economics - University of Waterloo [Waterloo])

  • Bernard Sinclair-Desgagné

Abstract

This paper examines the effect of emission taxes on pollution abatement and social welfare, when abatement goods and services are provided by a Cournot oligopoly with free-entry. We point out initially that a higher tax not only increases demand for abatement; it also makes polluters less sensitive to price. This attracts a larger number of abatement suppliers while possibly inducing each one of them to produce less. Total abatement always goes up, however, when the delivery of abatement goods and services exhibits decreasing returns to scale. We then calculate the welfaremaximizing-emission tax and compare it to the Pigouvian tax.

Suggested Citation

  • Maia David & Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2011. "Emission taxes and the market for abatement goods and services," Post-Print hal-01019345, HAL.
    • Handle: RePEc:hal:journl:hal-01019345
    DOI: 10.1016/j.reseneeco.2010.04.010
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