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Título
Optimal environmental policy for a polluting monopoly with abatement costs: Taxes versus standards
Año del Documento
2018
Descripción
Producción Científica
Documento Fuente
Environmental Modelling & Assessment, 2018, vol. 23, n. 6. p. 671-689
Résumé
In this paper, we characterize the optimal environmental policy for a polluting monopoly that devotes resources to abatement
activities when damages are caused by a stock pollutant. With this aim, we calculate the stagewise feedback Stackelberg
equilibrium of a (differential) policy game where the regulator is the leader and the monopolist is the follower. Our analysis
shows that the first-best policy consists of applying a Pigouvian tax and a subsidy on production equal to the difference
between the price and the marginal revenue. However, for a stock pollutant, the Pigouvian tax is not equal to the marginal
damages but is given by the difference between the social and private valuation of the pollution stock. On the other hand,
if a second-best emission tax is used, the tax is lower than the Pigouvian tax and the difference decreases with the price
elasticity of the demand. Finally, we find that taxes and standards are equivalent in a second-best setting. In the second part
of the paper, we solve a linear-quadratic differential game and we obtain that the first-best tax increases with the pollution
stock whereas the subsidy decreases. Moreover, the tax is negative for low values of the pollution stock, i.e., for low values
of the pollution stock, we obtain that the social valuation of the stock is lower than the private valuation. Furthermore, when
a second-best policy is applied, the steady-state pollution stock is lower than the steady-state pollution stock associated with
the efficient outcome.
Revisión por pares
SI
Idioma
eng
Derechos
openAccess
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