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[en] Highlights: • We analyse the relationship between competition and ''green'' innovation. • We examine an oligopoly with pollution where firms compete and invest in ''green'' R&D. • We analyse the optimal emission tax set by a committed regulator. • An inverted-U relationship exists between R&D and the number of firms. - Abstract: We examine the relationship between competition and innovation in an industry where production is polluting and R&D has the aim to reduce emissions (''green'' innovation). We present an n-firm oligopoly where firms compete in quantities and decide their investment in ''green'' R&D. We analyse the case where the emission tax is set endogenously by a committed regulator and uncover an inverted-U relationship between innovation and competition that is mainly driven by the presence of R&D spillovers.
[en] We use a supply-demand approach to value energy products exposed to emission cost uncertainty. We find closed form solutions for a number of popularly traded energy derivatives such as: forwards, European call options written on spot prices and European Call options written on forward contracts. Our modeling approach is to first construct noisy supply and demand processes and then equate them to find an equilibrium price. This approach is very general while still allowing for sensitivity analysis within a valuation setting. Our assumption is that, in the presence of emission costs, traditional supply growth will slow down causing output prices of energy products to become more costly over time. However, emission costs do not immediately cause output price appreciation, but instead expose individual projects, particularly those with high emission outputs, to much more extreme risks through the cost side of their profit stream. Our results have implications for hedging and pricing for producers operating in areas facing a stochastic emission cost environment.
[en] This article presents a combined economic-political model of environmental taxation setting. The model introduces a third lobby group - the lobby of an eco-industry - in addition to the traditional lobbies of polluting firms and environmentalists. Pressure groups interact to influence the environmental tax chosen by a regulator maximizing its chances of being reelected. The eco-industry lobby adds a new political contribution toward a higher environmental tax. The imperfectly competitive structure of the eco-industry also modifies the incentives of the usual lobbies. When the foreign environmental policy is constant, environmentalists can be in favor of a decrease in the local tax in order to reduce foreign pollution. We also discuss the formation of alliances between the eco-industry and one of the other lobbies and their potential impact. In general, the impact of lobbying activities on the politically optimal tax is ambiguous and depends on the relative concentration of each pressure group. (author)
[en] A growing concern with environmental pollution is now observed all over the world, since it transcends national boundaries. In this context, the quintessential global problem is that of climate change. The quest for increased efficiency, quality of the environment and technologies of environmental conservation is of tremendous importance. This paper is focused on two broad environmental regulatory approaches: the Market-based and the command-based ones emission taxes and emission standards, respectively, with an example given for each of them. In consideration of these policy instruments, the paper analyzes the key issues surrounding the adoption of either approach in regulating the environment for an oil exporting country. (Authors)
[en] Output-based refunding of environmental policy revenues combines a tax on emissions with a production subsidy, typically in a revenue-neutral fashion. With imperfect competition, subsidies can alleviate output underprovision. However, when market shares are significant, endogenous refunding reduces abatement incentives and the marginal net tax or subsidy. If market shares differ, marginal abatement costs will not be equalized, and production is shifted among participants. In an asymmetric Cournot duopoly, endogenous refunding leads to higher output, emissions, and overall costs compared with a fixed rebate program targeting the same emissions intensity. These results hold whether emissions rates are determined simultaneously with output or strategically in a two-stage model. (author)
[en] The interest of international markets for pollution rights lies in their potential to achieve a pollution reduction objective in an efficient manner. Unfortunately, the tendency of participating countries to tax polluting goods locally undermines this potential. We propose a model to examine the interest of countries participating in a market for rights to pollute in taxing the good that generates pollution. In particular, this interest depends on the initial distribution of rights among participating countries. We show how rights should be allocated to the different participating countries in order to ensure market efficiency. These optimal allocations require that a sufficiently large fraction of rights be distributed free of charge rather than auctioned. (authors)
[en] Highlights: • We study the effects of environmental policies on the size distribution of firms. • Emission standards introduce regulatory asymmetries favoring small firms. • The profitability of abatement technologies can higher under emission standards. - Abstract: The potential impacts of strict environmental policies on production costs and firms' competitiviness are central to the choice of which policy to implement. However, not all the industries nor all firms within an industry are affected in the same way. In this paper, we investigate the effects of emission taxes, uniform emission standards, and performance standards on the size distribution of firms. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. On the contrary, emission taxes and performance standards reduce to a lower extent profits of larger firms but they do modify the optimal scale of firms. We also show that when the regulatory asymmetries created by emissions standards are taken into account, the profitability of emissions reducing technologies is higher under emission standards than under market-based instruments.
[en] Two observations motivate our research: the lack of acceptability of climate policies and the deficit of credibility, legitimacy and ownership of low-carbon scenarios. Both constitute a barrier to decision-making and slow the energy transition. To overcome these limitations, we have scripted a scenario using a co-development method involving 30 stakeholders from civil society and the private and public sectors. Stakeholders contributed significantly to the methodology by requesting data transparency, sensitivity tests and the clarification of economic and financial impacts. We incorporated the set of policies regarded as acceptable into the Imaclim-R model. The resulting scenario cuts CO_2 emissions by 68 % in 2050, an outcome close to the 75 % reduction target. The measures are beneficial to employment and economic growth, except in the short term. These findings provide solid foundations to build acceptable decarbonization pathways