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Environmental policy, technology adoption and the size distribution of firms

Jessica Coria and Efthymia Kyriakopoulou

Energy Economics, 2018, vol. 72, issue C, 470-485

Abstract: The potential impacts of strict environmental policies on production costs and firms' competitiviness are central to the choice of which policy to implement. However, not all the industries nor all firms within an industry are affected in the same way. In this paper, we investigate the effects of emission taxes, uniform emission standards, and performance standards on the size distribution of firms. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. On the contrary, emission taxes and performance standards reduce to a lower extent profits of larger firms but they do modify the optimal scale of firms. We also show that when the regulatory asymmetries created by emissions standards are taken into account, the profitability of emissions reducing technologies is higher under emission standards than under market-based instruments.

Keywords: Environmental regulations; Energy efficiency; Size distribution; Emission taxes; Emission standards; Performance standards (search for similar items in EconPapers)
JEL-codes: Q58 L25 Q55 (search for similar items in EconPapers)
Date: 2018
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