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

Kosuke Hirose, Akifumi Ishihara and Toshihiro Matsumura

MPRA Paper from University Library of Munich, Germany

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.

Keywords: net-zero-emissions industries; emissions tax; oligopolies (search for similar items in EconPapers)
JEL-codes: L13 L51 Q52 (search for similar items in EconPapers)
Date: 2025-05-23
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124825

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