Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy

Zhe Li ()

MPRA Paper from University Library of Munich, Germany

Abstract: Empirical studies suggest systematic relationships between plant’s productivity and plant’s emissions and emission-abatement costs. This paper demonstrates that productivity dispersion across plants is an important factor that influences the transmission of environmental policy. Within a general equilibrium framework, I model heterogeneous polluting plants by allowing them to be differing in productivity and to choose optimally a discrete emission-reduction technology taking into account both the costs of reducing emissions and the competition in the goods market. An emission-reduction policy affects the distribution of plants with the advanced abatement technology and relocates resources and market shares across plants. As a result, the aggregate effects of an environmental policy depend on the degree of productivity dispersion. Using Canadian data, I show quantitatively that the aggregate effects of an environmental policy significantly affected by the degree of productivity dispersion both in the transition periods and in the long-run steady-state equilibrium.

JEL-codes: E00 Q52 Q58 (search for similar items in EconPapers)
Date: 2008-09-14
New Economics Papers: this item is included in nep-dge, nep-eff, nep-ene, nep-env and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:9564

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