Environmental Policy and Endogenous Market Structure

Barbara Annicchiarico (barbara.annicchiarico@uniroma3.it), Luca Correani and Fabio Di Dio (fabio.didio@uniroma1.it)

No 384, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: This paper presents a simple dynamic general equilibrium model with supply-side strategic interactions to study the economic effects of mitigating greenhouse gas emissions in an economy with an emission cap and oligopolistic firms competing on prices. With such endogenous market structure a gradual decarbonization policy is likely to induce higher markups, while the number of active firms displays a U-shaped behavior, first decreasing and then increasing. In the long run more firms are active, but they transfer a part of the compliance cost to households by charging a higher markup. The negative effects on the level of economic activity of this anti-competitive outcome are strongly mitigated by recycling policies.

Keywords: Environmental Policy; Dynamic General Equilibrium Model; Endogenous Market Structure. (search for similar items in EconPapers)
JEL-codes: E32 Q54 Q58 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2016-06-22, Revised 2016-06-22
New Economics Papers: this item is included in nep-agr, nep-com, nep-dge, nep-ene, nep-env, nep-mac and nep-res
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Citations: View citations in EconPapers (4)

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Journal Article: Environmental policy and endogenous market structure (2018)
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