Standards, taxes and social welfare

Adriana Gama

Serie documentos de trabajo del Centro de Estudios Económicos from El Colegio de México, Centro de Estudios Económicos

Abstract: This paper ranks three widely used instruments to fight pollution under imperfect competition. We consider n symmetric and polluting firms that compete in quantity, have access to an exogenous cleaning technology and are subject to environmental regulation by means of either emission standards, performance standards or taxes. The environmental authority optimally chooses the instrument by maximizing social welfare. By solving the one- and the two-stage games, for exogenous and endogenous instruments respectively, we conclude that the standards dominate in terms of optimizing social welfare. In particular, the performance standard is the preferred instrument, while the tax is the least desirable policy for the regulator.

Keywords: environmental regulation; abatement cost; emission standard; performance standard; Pigouvian tax (search for similar items in EconPapers)
JEL-codes: H21 H23 L13 Q52 Q58 (search for similar items in EconPapers)
Date: 2017-05
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Persistent link: https://EconPapers.repec.org/RePEc:emx:ceedoc:2017-04

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