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Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries

Author

Listed:
  • Sonia Schwartz

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Hubert Stahn

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

Abstract

Permit markets lead polluting firms to purchase abatement goods from an eco-industry which is often concentrated. This paper studies the consequences of this sort of imperfectly competitive eco-industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second-best pollution cap. By comparing this situation to one of perfect competition, we show that Cournot competition on the abatement good market contributes not only to a nonoptimal level of emission reduction but also to a higher permit price, which reduces the production level. These distortions increase with market power, measured by the margin taken by the noncompetitive firms, and suggest a second-best larger pollution cap.

Suggested Citation

  • Sonia Schwartz & Hubert Stahn, 2014. "Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries," Post-Print hal-01463763, HAL.
  • Handle: RePEc:hal:journl:hal-01463763
    Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01463763
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    References listed on IDEAS

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    1. David, Maia & Nimubona, Alain-Désiré & Sinclair-Desgagné, Bernard, 2011. "Emission taxes and the market for abatement goods and services," Resource and Energy Economics, Elsevier, vol. 33(1), pages 179-191, January.
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    Cited by:

    1. Damien Sans & Sonia Schwartz & Hubert Stahn, 2015. "On Abatement Services: Market Power and Efficient Environmental Regulation," Working Papers halshs-01182200, HAL.
    2. repec:eee:jeeman:v:84:y:2017:i:c:p:44-61 is not listed on IDEAS
    3. Damien Sans & Sonia Schwartz & Hubert Stahn, 2014. "About Polluting Eco-Industries: Optimal Provision of Abatement Goods and Pigouvian Fees," Working Papers halshs-01083464, HAL.
    4. Sanz, Nicolas & Schwartz, Sonia, 2013. "Are pollution permit markets harmful for employment?," Economic Modelling, Elsevier, vol. 35(C), pages 374-383.
    5. Damien Sans & Sonia Schwartz & Hubert Stahn, 2017. "About polluting eco-industries: optimal provision of abatement goods and Pigouvian fees," Post-Print hal-01682684, HAL.
    6. Damien Sans, 2015. "Optimal Taxation Rule Reversal in the Presence of Gentle Polluters and Greedy Cleaners," Working Papers halshs-01247190, HAL.
    7. repec:kap:enreec:v:70:y:2018:i:1:d:10.1007_s10640-017-0110-2 is not listed on IDEAS

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    Keywords

    Economie quantitative;

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