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Environmental Regulation and the Eco-Industry

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Abstract

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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Authors and Affiliations

  1. UMR INRA-INAPG Économie publique, Paris, France

    Maia David

  2. École polytechnique, Paris, France

    Bernard Sinclair-Desgagné

  3. CIRANO, CIRAIG and HEC, Montréal, Canada

    Bernard Sinclair-Desgagné

Authors
  1. Maia David
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  2. Bernard Sinclair-Desgagné
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Corresponding author

Correspondence to Maia David.

Additional information

We thank Dominique Bureau, Olivier Godard, Émeric Henry, Nicolas Marchetti, Alain-Désiré Nimubona, Anne Perrot, Gilles Rotillon, Katheline Schubert, the editors Michael Crew and Anthony Heyes, and two anonymous referees for helpful discussions and suggestions. We also acknowledge valuable comments from seminar audiences at HEC Montréal, the University of Paris I, the University of Toulouse, and the DG-Entreprise of the European Commission in Brussels.

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David, M., Sinclair-Desgagné, B. Environmental Regulation and the Eco-Industry. J Regul Econ 28, 141–155 (2005). https://doi.org/10.1007/s11149-005-3106-8

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  • DOI: https://doi.org/10.1007/s11149-005-3106-8

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