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Tradable quota taxation and market power

D’Amato, Alessio, Edilio Valentini () and Mariangela Zoli ()
Authors registered in the RePEc Author Service: Alessio D'Amato ()

Energy Economics, 2017, vol. 63, issue C, 248-252

Abstract: We investigate how corrective taxation can improve the efficiency properties of tradable quota systems affected by market power. Indeed, we show that, when there is a dominant firm in the tradable quota market, the regulator can set an ad hoc taxation on firms' traded quotas that restores cost effectiveness without driving the dominant firm's net demand to zero. Achieving cost effectiveness with market power and quota taxation implies some costs in terms of tax revenue that, however, can be justified by the corresponding reduction of compliance costs. Moreover, we see that there may be cases where all firms result to be better off after the implementation of corrective taxation.

Keywords: Tradable quota markets; Market power; Tradable quota taxation (search for similar items in EconPapers)
JEL-codes: Q58 H23 (search for similar items in EconPapers)
Date: 2017
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