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

  • Sonia Schwartz

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Hubert Stahn

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

Permit markets lead polluting firms to purchase abatement goods from an eco-industry, which is often concentrated. This paper studies the consequences of imperfect competition in an eco-industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second best pollution cap. By comparing this situation to a competitive one, we show that Cournot competition on the abatement good market contributes not only to a non optimal 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 non competitive firms and suggest a second best less stringent pollution cap

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Paper provided by HAL in its series Working Papers with number halshs-00501831.

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Date of creation: 12 Jul 2010
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Handle: RePEc:hal:wpaper:halshs-00501831
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00501831/en/
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  1. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, vol. 28(2), pages 141-155, 09.
  2. Alain-Désiré Nimubona & Bernard Sinclair-Desgagné, 2013. "The Pigouvian Tax Rule in the Presence of an Eco-Industry," Economics Bulletin, AccessEcon, vol. 33(1), pages 747-752.
  3. Joan Canton & Antoine Soubeyran & Hubert Stahn, 2008. "Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(3), pages 369-382, July.
  4. Canton, Joan, 2008. "Redealing the cards: How an eco-industry modifies the political economy of environmental taxes," Resource and Energy Economics, Elsevier, vol. 30(3), pages 295-315, August.
  5. Maia David & Bernard Sinclair-Desgagné, 2010. "Pollution Abatement Subsidies and the Eco-Industry," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(2), pages 271-282, February.
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