Advertisement

Environmental and Resource Economics

, Volume 46, Issue 3, pp 275–280 | Cite as

Emission Taxes and Optimal Refunding Schemes with Endogenous Market Structure

  • Susumu Cato
Article

Abstract

The purpose of this paper is to investigate optimal schemes for refunding the emission tax in a free-entry market where the production process generates emissions. We consider the regulation by a three-part tax policy: the government sets an emission tax, a refunding scheme, and an entry-license tax. In contrast to the case of the two-part tax-refund policy under no entry, we show that even if it is impossible to obtain subsidies from outside, the first-best outcome is always attained. Further, the government’s budget constraint is binding under the optimal schemes. Our result implies that the tax-refund system works effectively in a market with endogenous entry.

Keywords

Emission tax Entry-license tax First-best outcome Free entry Government’s budget constraint Refunds 

JEL Classification

H42 L13 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Barnett AH (1980) The Pigouvian tax rule under monopoly. Am Econ Rev 70: 1037–1041Google Scholar
  2. Baumol WJ, Oates WE (1988) The theory of environmental policy. 2nd edn. Cambridge University Press, CambridgeGoogle Scholar
  3. Buchanan JM (1969) External diseconomies, corrective taxes, and market structure. Am Econ Rev 59: 174–177Google Scholar
  4. Fischer C (2003) Market power and output-based refunding of environmental policy revenues. Discussion paper 03–27, Resources for the futureGoogle Scholar
  5. Fredrikssona PG, Sterner T (2005) The political economy of refunded emissions payment programs. Econ Lett 87: 113–119CrossRefGoogle Scholar
  6. Gersbach H, Requate T (2004) Emission taxes and optimal refunding schemes. J Public Econ 88: 713–725CrossRefGoogle Scholar
  7. Gersbach H, Winkler R (2007) On the design of global refunding and climate change. Working Paper, CER-ETH—Center of Economic Research at ETH ZurichGoogle Scholar
  8. Gersbach H, Winkler R (2008) International emission permit markets with refunding. Working Paper, CER-ETH—Center of Economic Research at ETH ZurichGoogle Scholar
  9. Katsoulacos Y, Xepapadeas A (1995) Environmental policy under oligopoly with endogenous market structure. Scand J Econ 97: 411–420CrossRefGoogle Scholar
  10. Lee DR (1975) Efficiency of pollution and market structure. J Environ Econ Manag 2: 69–72CrossRefGoogle Scholar
  11. Levin D (1985) Taxation within Cournot oligopoly. J Public Econ 27: 281–290CrossRefGoogle Scholar
  12. Mankiw NG, Whinston MD (1986) Free entry and social inefficiency. RAND J Econ 17: 48–58CrossRefGoogle Scholar
  13. Misolek WS (1980) Effluent of taxation in monopoly markets. J Environ Econ Manag 7: 103–107CrossRefGoogle Scholar
  14. Requate T (1993) Pollution control in a Cournot duopoly via taxes or permits. J Econ 58: 255–291Google Scholar
  15. Requate T (1997) Green taxes in oligopoly if the number of firms is endogenous. Finanzarchiv 54: 261–280Google Scholar
  16. Simpson RD (1995) Optimal pollution taxation in a Cournot duopoly. Environ Resour Econ 6: 359–369CrossRefGoogle Scholar
  17. Sterner T, Isaksson HL (2006) Refunded emission payments theory, distribution of costs, and Swedish experience of NO x abatement. Ecol Econ 57: 93–106CrossRefGoogle Scholar
  18. Suzumura K, Kiyono K (1987) Entry barriers and economic welfare. Rev Econ Studies 54: 157–167CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Institute of Social ScienceThe University of TokyoTokyoJapan

Personalised recommendations