Optimality of emission pricing policies based on emission intensity targets under imperfect competition

Hiroaki Ino and Toshihiro Matsumura

Energy Economics, 2021, vol. 98, issue C

Abstract: This study proposes an emission-intensity-based emission tax as a policy solution for negative environmental externality in oligopoly markets. Emissions are taxed when firms' emission intensities exceed their target level. We show that even under imperfect competition, this emission pricing policy leads to the first-best outcome. The optimal tax rate is equal to the Pigovian tax. This principle can also apply to tradable emission permits traded based on emission intensity targets.

Keywords: Optimal taxation; Environmental regulation; Cournot competition; Bertrand competition; Renewable portfolio standard; Carbon pricing (search for similar items in EconPapers)
JEL-codes: H23 L51 Q48 Q58 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Optimality of Emission Pricing Policies Based on Emission Intensity Targets under Imperfect Competition (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001432

DOI: 10.1016/j.eneco.2021.105238

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