Market Power and Output-Based Refunding of Environmental Policy Revenues

No 10893, Discussion Papers from Resources for the Future

Abstract: Output-based refunding of environmental policy revenues combines a tax on emissions with a subsidy to output. With imperfect competition, subsidies can discourage output underprovision. However, when market shares are significant, endogenous refunding suffers compared to a fixed subsidy. Refunding the emissions tax according to market share reduces the incentive to abate, and marginal abatement costs will not be equalized if market shares differ. In a Cournot duopoly, endogenous refunding leads to higher output, emissions, and possibly costs compared to a fixed rebate program. These results hold whether emission rates are determined simultaneously or strategically in a two-stage model.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 25
Date: 2003
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Market power and output-based refunding of environmental policy revenues (2011)
Working Paper: Market Power and Output-Based Refunding of Environmental Policy Revenues (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rffdps:10893

DOI: 10.22004/ag.econ.10893

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