RT info:eu-repo/semantics/article
T1 Optimal environmental policy for a polluting monopoly with abatement costs: Taxes versus standards
A1 Martín Herrán, Guiomar
A1 Rubio, Santiago
AB In this paper, we characterize the optimal environmental policy for a polluting monopoly that devotes resources to abatementactivities when damages are caused by a stock pollutant. With this aim, we calculate the stagewise feedback Stackelbergequilibrium of a (differential) policy game where the regulator is the leader and the monopolist is the follower. Our analysisshows that the first-best policy consists of applying a Pigouvian tax and a subsidy on production equal to the differencebetween the price and the marginal revenue. However, for a stock pollutant, the Pigouvian tax is not equal to the marginaldamages 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 priceelasticity of the demand. Finally, we find that taxes and standards are equivalent in a second-best setting. In the second partof the paper, we solve a linear-quadratic differential game and we obtain that the first-best tax increases with the pollutionstock whereas the subsidy decreases. Moreover, the tax is negative for low values of the pollution stock, i.e., for low valuesof the pollution stock, we obtain that the social valuation of the stock is lower than the private valuation. Furthermore, whena second-best policy is applied, the steady-state pollution stock is lower than the steady-state pollution stock associated withthe efficient outcome.
YR 2018
FD 2018
LK http://uvadoc.uva.es/handle/10324/34121
UL http://uvadoc.uva.es/handle/10324/34121
LA eng
NO Environmental Modelling & Assessment, 2018, vol. 23, n. 6. p.  671-689
NO Producción Científica
DS UVaDOC
RD 05-nov-2024