FEEM working papers "Note di lavoro" series
2005 .056

Environmental Regulation and the Eco-Industry

Authors: Bernard Sinclair-Desgagné, Maia David
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Pollution regulation,End-of-pipe pollution abatement,Environment
JEL n.: H23,L13,Q58
JEL: Journal of Regulatory Economics
Pages: Vol. 28, No. 2, pp. 141-155
Date: 09/2005


This paper re-examines environmental regulation, under the assumption that pollution abatement technologies and services are provided by an imperfectly competitive environment industry. It is shown that each regulatory instrument (emission taxes and quotas; design standards; and voluntary agreements) has a specific impact on the price-elasticity of the polluters' demand for abatement services, hence on the market power of the eco-industry and the resulting cost of abatement. This implies that the optimal pollution tax will be higher than the marginal social cost of pollution, while a voluntary approach to pollution abatement may fail unless the eco-industry itself is willing to participate.

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