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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

Abstract: 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)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2017-01
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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:170001

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