EconPapers    
Economics at your fingertips  
 

Price Effects, Inefficient Environmental Policy, and Windfall Profits

Jay S. Coggins, Andrew L. Goodkind (), Jason Nguyen and Zhiyu Wang
Additional contact information
Jay S. Coggins: University of Minnesota
Andrew L. Goodkind: University of New Mexico
Jason Nguyen: University of Minnesota
Zhiyu Wang: National University of Singapore

Environmental & Resource Economics, 2019, vol. 72, issue 3, 637-656

Abstract: Abstract We examine conditions under which a new or tighter restriction on emissions from a competitive polluting industry creates price effects in adjacent markets. Price effects may arise when a quantity restriction on emissions causes output to fall and, therefore, output price to rise. They may also arise when the required reduction in output causes the price of a polluting input to fall. We model emissions as a fixed proportion of output, limiting the possibilities for input substitutions. The possibility of price effects exists whenever the set of regulated firms is large relative to its input or output markets, a possibility that is expressly ruled out in Montgomery’s (J Econ Theory 5:395–418, 1972) paper. Two potential implications of price effects are explored. One is an efficiency concern: a welfare-maximizing regulator who neglects price effects will require more than the optimal level of abatement. The other is a distributional concern: an emissions restriction might create windfall profits for the polluting industry.

Keywords: Environmental policy; Windfall profits; Price effects (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10640-018-0217-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:72:y:2019:i:3:d:10.1007_s10640-018-0217-0

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-05-15
Handle: RePEc:kap:enreec:v:72:y:2019:i:3:d:10.1007_s10640-018-0217-0