Cross-Country Emission Tax Effect of Mergers

Luis Gautier () and Mahelet Fikru ()
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Luis Gautier: Universidad de Málaga, Departamento de Teoría e Historia Econòmica

Chapter Chapter 11 in Handbook of Merger Control and Environmental Policy, 2024, pp 207-223 from Springer

Abstract: Abstract Recent studies show that mergers among polluting firms could affect the regulatory landscape of the industry and trigger a policy change. Using a two-country model, this study examines the effect of a merger size, as measured by the number of merging firms, on the optimal emission tax of another country. We show that, if pollution damages are not too large, a decline in the size of a merger reduces production and profits in that country, which affords a larger tax in the other country due to smaller profit-shifting concerns. On the other hand, if pollution damages are extremely large, a reduction in the size of a merger in one country reduces production in that country, but it also reduces production and emissions in the other country. Thus, the latter can induce a smaller emission tax. The change in the emission tax in both scenarios is consistent with cooperative outcomes.

Date: 2024
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Journal Article: Cross-country Emission Tax Effect of Mergers (2023)
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DOI: 10.1007/978-3-031-63549-6_11

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