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Regulating a Polluting Oligopoly: Emission Tax or Voluntary Agreement?

Régulation d'un oligopole polluant: taxe ou approche volontaire ?

Maia David

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Abstract: This paper compares, in a polluting oligopoly, an emission tax and a form of environmental policy calledvoluntary agreement (VA). Here there are two ways of reducing pollution: output contraction and end-of-pipe abatement. Given the imperfect competition, firms' reaction to the tax is sub-optimal. They reduceoutput excessively in order to raise the price and do not abate enough. The VA is a take-it-or-leave-it con-tract on abatement effort, offered to the firms with the threat of a tax. It has a limited effect on output andalways allows higher abatement than the tax. We find that this kind of VA may be more efficient than thetax in a concentrated industry, when pollution is not too harmful and when the abatement technology israther efficient and cheap.

Keywords: économie de l'environnement; Taxe; Fiscalité de l'environnement; Oligopole (search for similar items in EconPapers)
Date: 2005-11
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02368655
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Published in Review of Development Economics, Wiley, 2005, 9 (4), pp.514-529. ⟨10.1111/j.1467-9361.2005.00291.x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02368655

DOI: 10.1111/j.1467-9361.2005.00291.x

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