Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171630
Authors: 
Nicolaï, Jean-Philippe
Year of Publication: 
2015
Series/Report no.: 
Economics Working Paper Series 13/187
Abstract: 
This paper analyzes the long-term investment decisions of firms that are regulated by an emissions tax and that perceive a degree of market power in their respective output markets. Firms invest in abatement equipment that is fixed over the medium term (e.g., buying a new generator). This paper focuses on environmental regulation with and without commitment. In the commitment case, the government announces a long-run tax on emissions, and firms decide upon their investment levels. In the no-commitment case, the regulator announces a tax level and is free to modify it once firms have invested. This paper considers differentiated product goods and determines whether no-commitment regulation leads to more lenient or more stringent regulation than regulation with commitment.
Subjects: 
Pollution permits
imperfect competition
investment
strategic effects
JEL: 
L13
Q50
L51
Document Type: 
Working Paper

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