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Emission taxes and the market for abatement goods and services

Maia David, Alain-Désiré Nimubona () and Bernard Sinclair-Desgagné

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Abstract: This paper examines the effect of emission taxes on pollution abatement and social welfare, when abatement goods and services are provided by a Cournot oligopoly with free-entry. We point out initially that a higher tax not only increases demand for abatement; it also makes polluters less sensitive to price. This attracts a larger number of abatement suppliers while possibly inducing each one of them to produce less. Total abatement always goes up, however, when the delivery of abatement goods and services exhibits decreasing returns to scale. We then calculate the welfaremaximizing-emission tax and compare it to the Pigouvian tax.

Keywords: EMISSION TAX; ENDOGENOUS MARKET STRUCTURE; ECO-INDUSTRIE; FREE-ENTRY OLIGOPOLY; STRUCTURE DE MARCHE ENDOGENE; ENVIRONMENTAL POLICY; FREE ENTRY; ECO INDUSTRY; OLIGOPOLY; TAXATION; COMPETITION; INDUSTRIE (search for similar items in EconPapers)
Date: 2011
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01019345
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Published in Resource and Energy Economics, Elsevier, 2011, 33 (1), pp.179-191. ⟨10.1016/j.reseneeco.2010.04.010⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01019345

DOI: 10.1016/j.reseneeco.2010.04.010

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