Optimal Carbon Tax Scheme under Uncertainty in an Oligopolistic Market of Polluters
Andreas Welling ()
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Andreas Welling: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
No 170001, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management
Carbon taxation is used by several countries to internalize the negative effects of carbon emissions to the emitters of carbon. In this article the effects of a carbon tax on an oligopolistic market of polluters are analyzed. With the help of a multi-criteria optimization model the optimal carbon tax rate is determined; first under certainty and then in presence of demand uncertainty. It is shown that demand uncertainty leads to a lower optimal carbon tax rate, while it simultaneously increases carbon emissions. Finally, the influence of a possible carbon emission reducing investment is analyzed with the help of a real option model.
Keywords: Carbon Tax; Climate Change; Real Option; Technological Progress; Uncertainty; Oligopolistic competition (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:170001
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