Journal
ENVIRONMENTAL & RESOURCE ECONOMICS
Volume 45, Issue 2, Pages 271-282Publisher
SPRINGER
DOI: 10.1007/s10640-009-9315-3
Keywords
Environment goods and services industry; Pigouvian taxes; Pollution abatement subsidies
Categories
Ask authors/readers for more resources
This paper considers the combination of pollution taxes and abatement subsidies when some polluting firms procure their abatement goods and services from an oligopolistic eco-industry. The regulator must here cope with two simultaneous price distortions: one that comes from pollution and the other which is caused by the eco-industry's market power. In this context, we show that taxing emissions while subsidizing polluters' abatement efforts cannot lead to first-best, but the opposite occurs provided it is the eco-industry's output which is subsidized. When public transfers also create distortions, welfare can be higher if the regulator uses only an emission tax, but subsidizing abatement suppliers while taxing emissions remains optimal when the eco-industry is concentrated.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available