Tradable Quotas Taxation and Market Power

Alessio D'Amato (), Edilio Valentini and Mariangela Zoli

No 371, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We show how corrective taxation can improve the efficiency properties of tradable quotas systems a¤ected by market power. Indeed, when only a subset of firms are price takers while the remaining firms enjoy market power, we show that, if the regulator sets an ad hoc taxation on firms' traded quotas, cost effectiveness can be restored without necessarily driving dominant firm(s) net demand to zero. Cost effectiveness with market power and quotas taxation implies some cost in terms of tax revenue that, however, can be justified from a social welfare perspective. Moreover, all firms may result to be better off when the corrective taxation is implemented.

Keywords: tradable quotas markets; market power; tradable quotas taxation. (search for similar items in EconPapers)
JEL-codes: H23 Q58 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-03-24, Revised 2016-03-24
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (2)

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Journal Article: Tradable quota taxation and market power (2017)
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