EconPapers    
Economics at your fingertips  
 

Time-inconsistent environmental policies with a consumer-friendly firm: tradable permits versus emission tax

Arturo Garcia, Mariel Leal and Sang-Ho Lee ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study considers the timing of environmental policies with a consumer-friendly firm having abatement technology, and compares two market-based regulations: tradable permits and emission tax regulations. When the government can credibly commit its policy, we show that the equilibrium outcomes under both policies are equivalent in terms of permits price and tax rate. Under the non-committed policy, however, the equivalence breaks down because firms have different incentives to induce time-consistent policy to be adjusted ex post. In particular, compared to pre-committed government, firms abate less emission to induce higher emission quotas under the permits policy while a consumer-friendly firm abates more emissions to reduce tax rate under the tax policy. Finally, we show that tax policy can induce higher welfare and lower environmental damage when the concern on consumer surplus is moderate.

Keywords: abatement technology; consumer-friendly firm; environmental policy; tradable permits; emission tax (search for similar items in EconPapers)
JEL-codes: L13 L31 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Date: 2018-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/86407/1/MPRA_paper_86407.pdf original version (application/pdf)

Related works:
Journal Article: Time-inconsistent environmental policies with a consumer-friendly firm: Tradable permits versus emission tax (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:86407

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2019-04-14
Handle: RePEc:pra:mprapa:86407