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Profit-enhancing emissions taxes in near-zero-emissions industries

Author

Listed:
  • Hirose, Kosuke
  • Ishihara, Akifumi
  • Matsumura, Toshihiro

Abstract

Motivated by the recent global trend of net-zero-emissions environmental regulations, we investigate the relationship between emissions tax rates and firm profits in oligopolies. Our result indicates that when the resulting emission levels are approximately zero, a marginal increase in the tax rate enhances firms' profits except in monopoly markets. This finding suggests that firms might not resist a further increase in environmental tax if the target emissions level is sufficiently low. Moreover, we present parametric numerical examples suggesting that the profit-enhancing range is large and not limited to near-zero emissions.

Suggested Citation

  • Hirose, Kosuke & Ishihara, Akifumi & Matsumura, Toshihiro, 2025. "Profit-enhancing emissions taxes in near-zero-emissions industries," MPRA Paper 124825, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:124825
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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