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Emission taxes and the market for abatement goods and services

Listed author(s):
  • 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

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.

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Paper provided by HAL in its series Post-Print with number hal-01019345.

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Date of creation: 2011
Publication status: Published in Resource and Energy Economics, Elsevier, 2011, 33 (1), pp.179-191. <10.1016/j.reseneeco.2010.04.010>
Handle: RePEc:hal:journl:hal-01019345
DOI: 10.1016/j.reseneeco.2010.04.010
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01019345
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  19. Hamilton, Stephen F., 1999. "Demand shifts and market structure in free-entry oligopoly equilibria," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 259-275, February.
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